No. of Recommendations: 0
Does this make sense? I figure it's a good idea to take advantage of the tax deferral of an IRA by buying high yield mutual funds (relative term, the highest yielding funds I can affort are running 7% yield) with decent total return so that the reinvestment of yield causes your number of shares to grow fast (relative to low yield investment) and you are not paying current tax on the income. If the market is down when it comes time to sell, the larger number of shares somewhat mitigates a drop in NAV. As opposed to say a growth fund or individual stocks where your number of shares grows more slowly and your only chance to make a profit is if the NAV or share price happens to be higher when you sell than when you bought all those years ago. BTW, I think I am misunderstanding a fundamental point on how one expects to profit from a buy and hold growth strategy. How much growth can one expect long term when good quality stocks or well performing growth mutual funds are already highly priced? Do long term investors in a Coke or Microsoft expect the share prices to be multiples of what they are today in later years? If the share prices have not increased by multiples how have they made money?

Well there's my ignorance for all to see. I appreciate any discussion of these points.
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.