I was wondering...how does one effectively use a Roth IRA, for example what's the best vehicle to use to maximize the profits of a Roth. Can it be used in conjunction with any of the BTD methods for example. Does it make more sense to just invest the same $2000 in an index fund. I thought perhaps taking advantage of the no taxes on profits made sense...but I am a little confused whats the catch here. I mean I use post tax dollars and never have to worry about taxes again...is this really the case...HELPPPPPp lol.


Anthony
PS. I would appreciate some real insightful replies you fools.

You have effectively summed it up: "I use post tax dollars and never have to worry about taxes again." As long as congress doesn't change the rules, this is the best benefit they've given up, ever.

I converted my former traditional IRA to a Roth IRA last year. I hold exclusively individual stocks through my no-IRA-fee broker. Low transaction costs. No service. Just a monthly statement.

Hey Isiszion,

A Roth like you said is made with post tax contributions so you everything that comes out is tax free.

As far as maximizing investment returns, it's hard to give advice since I don't anything about your risk tolerance or your age till retirement, or any other needs you might need to tap the Roth for (e.g. first time contribution to house or educational expenses).


But there are certain investment strategies that work well with a no-taxed account like a Roth. Any stock investing large dividends should be placed in a roth along with anything that requires annual turnover where you need to rebalnce and sell some stock (RP4 fits both criteria). Also anything where you might want to speculate in the short term profits (not that I'm advocating) like those B2B, internet, and other high tech fliers with suspect fundamentals but great technicals.

Cheers,
John

Great info John its appreciated. Well in answer to my risk tolerance hers my situation. Im 25 out of debt except for a school loan at 7.5%(balance right now 13,000). Im not too worried about risk.. I figure the "wise" out there keep saying that 30 is not a bad age to start investing(given the #'s I keep seeing at 11%). Well Ill be 26 in January...so I figure take all the risks I can now cause after all if it goes to hell in the next 15 yrs(I doubt it..lol)Ill still be young enough to recover and try another strategy. If anything I see my Roth funds probably going to a house purchase, but I doubt that highly because I am a avid student of Real Estate one of passions really, and there are solid ways to get into your first home without all the mind boggling hassles the Banks would have you believe is necessary. So to sum it up risk..bring it on. Of course I dont need any fly by night schemes though.lol
So now give me your take on my situation as it stands now. How do I now best take advantage of my youth.

Anthony

OK Don I see, well thats just it. I was a bit confused myself for a while I kept thinking that if that was the case. Why would I not put all the money I could in a Roth..after all get taxed once and be done with it right. Well as long as I can indeed employ one of the strategies recommended here in fooldom like say the Foolish four of a variant of the BTD(granted it seems I would have to hold say three of stocks instead of five or ten), this should indeed be a good plan.

Say if I am overlooking anything let me know....

And thanks again for the input..

Anthony

Well I'm also young (just turned 21 last month) and the way to go is a 100% equities allocation for someone for our age. I don't know what more to add to except that you want to start early and contribute as much as often to max out tax deferred accounts and then to a PA account. The name of the game is compounding and starting early will compensate for not having too much in the beginning or making some mistakes. That's the advanatage that youth provides IMHO.


It's easy to say that you're immune to risk but you have to know how'd you react if your portfolio lost more than half its value in one day. Once you have a good idea of whether you would have control over your emotions, then focus on picking some quality growth stocks. Investing in quality is a must and you shouldn't neccesarily chase after risk. Risk and reward are joined at the hip and but you don't want too much risk for little reward. Coming up with the right ratio is the key to investing well. Risk just comes with the territory if you're focusing on certain sectors like tech, the internet, or B2B stocks.


Just of curiosity, do invest in any real estate? I've been trying to read up and learn on the subject but not that many people here seem to be interested in talking about that kind of stuff (except the guys on the REIT board).


Cheers,
John

Well john how I envy you those five years..lol. Oh by the way you are very well informed on the topic, as are so many fools Ive met to date.

Well john I indeed understand that a good mix has to be achieved as far as risk and rewards. I guess its just a part of my genetic make-up...risk taking that is. I have always believed that in life if you wish to succeed BIG you have to risk even BIGGER. But of course the risks we are talking about here are not just some off the wall con man hey "I can get you a 120% return in a weeK"..lol. Now thats the kinda risks Id stay far from. But you are right and I am still attempting to work out that perfect formula for me.

As for Real Estate..I would have probably already been invested already John...but you know how DEBT and high interest DEBT by the way can slow your projects down. However this year and beyond this will be a major maybe 50 to 60% of my retirement game.

Im sorry to hear no one wants to discuss Real Estate thats a shame. But you must understand John that a lot of the wise and maybe some of us fools too have never took the time to really understand how the beast(Real Estate) really works and its such a shame too. When so many of the prominent families in a America have taught by examples how lucrative Real Estate can be.

I look forward to our future discussions on the topic. Hope I can provide you with just as much foolish info as you have offered me on my Roth issue.

Anthony