a friend of mine and I were wondering what the advantages were of an IRA over a Mutual Fund, and vice versa. or are we comparing apples to oranges completely.Foolishly yours,Dan
a friend of mine and I were wondering what the advantages were of an IRA over a Mutual Fund, and vice versa. or are we comparing apples to oranges completely.Dear Dan,An IRA is the basket into which you can put the Mutual Fund apples and oranges. The fruits of your labors can also include individual stocks which you select yourself, not only Mutual Funds, which are run by a company. I will leave more details to the pros here.Meowiz
An IRA is an Individual Retirement Account.In this type of account, the money you contribute can be deducted from your taxable income. So if you make $50,000 per year and contribute $2,000 to an IRA, your taxable income is only $48,000. The earnings on your contribution are tax deferred, menaing if you contribute $2,000 and it grows to $2,500 you do not pay capital gains taxes. You only pay taxes when you withdraw the money. Withdrawals generally are not allowed until you reach age 59 1/2. There are some exceptions. If you do withdraw prior to this, you will pay regualr tax plus a 10% penalty. Money in an IRA con be invested in anything you wish. Stocks, Bonds, Mutual Funds, CDs, etc.Mutual funds are an investment option for people who don't want to invest in a single stock or bond. ou get diversification because a mutual fund owns hundreds of stocks in its portfolio. Search the FOOL web site for much more detailed information on IRAs and Mutual fundsGood luckBill
I liked the Apple and basket comparison. I was thinking Apple and Cart myself. (The Apple/Mutual funds being sold) Many people think of IRA's as just the Account you open at the bank with CD's in them.
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |