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Author: sferguson Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: New Roth IRA Date: 12/16/1998 5:20 PM
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I'm setting up a Roth IRA for me and my wife. We're planning on using one of the FoolishFour strategies. We want to contribute the maximum of $4,000 this year. I've never seen it spelled out clearly but everything reads like I need to set up two accounts, one in her name and one in mine. Can anyone clear this up for me?

If I do need to set up two accounts, I suppose it would be Foolish to only buy two of the stocks in her account and the other two stocks on my account to save commission costs.

Thanks for your help.
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Author: ZorroFool One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7341 of 76418
Subject: Re: New Roth IRA Date: 12/16/1998 5:37 PM
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Yep, you definitely need separate accounts, one for you and one for your wife. (IRA = Individual Retirement Account, with emphasis on Individual.)

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Author: TchrP Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7342 of 76418
Subject: Re: New Roth IRA Date: 12/16/1998 6:28 PM
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You would save on commissions by purchasing only two stocks in each account. (You definitely need separate accounts.)

But will you be able to cope with the difference in results between the two accounts?

I happen to have purchased two stocks in each of two new IRAs this year (a traditional for 1997 and a Roth for 1998 -- I haven't yet converted the traditional IRA because it was due to receive rollover funds).

Even though one stock in each account did well and the other didn't, the accounts are not equal now. If the two better performers had been in the same account, the difference would be greater. How would you deal with that?

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7345 of 76418
Subject: Re: New Roth IRA Date: 12/17/1998 7:45 AM
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Sferguson asks:

<<I'm setting up a Roth IRA for me and my wife. We're planning on using one of the FoolishFour strategies. We want to contribute the maximum of $4,000 this year. I've never seen it spelled out clearly but everything reads like I need to set up two accounts, one in her name and one in mine. Can anyone clear this up for me?

If I do need to set up two accounts, I suppose it would be Foolish to only buy two of the stocks in her account and the other two stocks on my account to save commission costs.>>


ZorroFool provided the answer to the separate account issue, and TchrP pointed out that trying to do a single FoolishFour strategy in two accounts quickly leads to an unbalanced situation. No IRA can be held jointly, so you can't combine the accounts. And, based on personal experience, I'll guarantee it's impossible to maintain a consistent FF approach using two separate IRAs.

Regards….Pixy


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Author: BillEuclid Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7370 of 76418
Subject: Re: New Roth IRA Date: 12/19/1998 3:43 AM
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TchrP said, You would save on commissions by purchasing only two stocks in each account. (You definitely need separate accounts.) But will you be able to cope with the difference in results between the two accounts?

The trick is to generally have 3 stocks in one account and 2 in the other. The larger account is the one with the 3 stocks. This means that you pay 5 commissions each year instead of 8.

Example: If, at the time you are to buy 4 companies, one IRA has $16,000 and the other $12,000, then each stock will be (16000+12000)/4 = $7,000. So you spend $7000 for each of 2 in the larger IRA, and $2000 for a third, and you use the other IRA for $7000 on the fourth and the remaining $5000 on the third.

Naturally, in cases when next year's FF includes several of this year's FF, you can make do with fewer purchases, but you will never need more than 5 new purchases in any one year.

I don't see the problem. Algebra solution: If IRAs are worth A and B with A greater than B, then buy 2 stocks worth (A+B)/4 in the A IRA, 1 stock worth (A+B)/4 in the B IRA, and the remaining money buys the 4th stock.

Bill



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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7385 of 76418
Subject: Re: New Roth IRA Date: 12/21/1998 9:24 AM
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BillEuclid writes:

<< Naturally, in cases when next year's FF includes several of this year's FF, you can make do with fewer purchases, but you will never need more than 5 new purchases in any one year.

I don't see the problem. Algebra solution: If IRAs are worth A and B with A greater than B, then buy 2 stocks worth (A+B)/4 in the A IRA, 1 stock worth (A+B)/4 in the B IRA, and the remaining money buys the 4th stock.>>


Putting aside the issue of the extra trading commissions, it's not so much an issue of it "can't" be done as it is one of administrative hassle. It sounds easy on paper, but after three or four iterations it becomes a pain in the rear. That's particularly true the more uneven in amount the two accounts are. If you're willing to put up with the juggling act, using two accounts for a single Dow portfolio is possible; but it certainly isn't fun. It boils down to how willing one is to put up with the needed administration.

Regards……..Pixy


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