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Gedanken has a nice question about trading in an IRA, and several fine responses. Let me start a new thread. I use this question when brokers cold-call me: OK, I have a taxable account and an IRA. I have
bonds, long-term-hold stocks that pay dividends, and aggressive stocks that I probably won't hold more than a few months.
Which goes where?
The cold callers, and I've done this on 20+, NEVER
have a thoughtful answer.
Before the change in capital gains rules, it used to make sense to have the bonds, which generate taxable income, in the IRA so the tax would be deferred. It always made sense for the long-term hold stocks to be in the taxable account, because as long as the stocks are not sold, capital gains would not be taxed anyway and the dividends are relatively less important.
In the last several months the speculative stocks have included two disasters (TAGS and VISX) and several spectacular winners (PMCS, AMCC, HLIT, PWAV, IDTI). To sell any of those in a taxable account now
before October will generate whopping capital gains taxes and make me lose deductions. I've split the aggressive picks between accounts, generally buying in the account where the money is available, and have totally given up buying bonds in an IRA even though outside the interest is fully taxable.
If an IRA pick tanks, right, I can't deduct the loss. So, if you are going to have a bunch more winners than losers, you do better to have 'em in the IRA. If you doubt your ability as a stock picker, put them in the taxable account.
Comments, Fools? Chris
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