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Hey all!
I just opened a Roth account. I'm actually just getting into the whole investing game and have been watching the market/boards for a while. i think i'm ready, and i have a list of stocks i want to begin with. in addition to the roth, i just opened an individual account.
now, i can't decide which stocks to throw in which account--i've heard different things, like biotech is good for retirement investing, and such. i know the roth should consist of long-term investments, but, foolishly, shouldn't all of my investments be long-term? so, then, what is the distinction? Again, i have a list of stocks that i like and think are good for long-term. so, it shouldn't really matter which stock I throw in which port, right?

Thanks!
JAK
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"i have a list of stocks i want to begin with. in addition to the roth, i just opened an individual account."

Good for you!

"now, i can't decide which stocks to throw in which account--i've heard different things, like biotech is good for retirement investing, and such. i know the roth should consist of long-term investments, but, foolishly, shouldn't all of my investments be long-term?"

And all stocks should go straight up. However....


"if so, then, what is the distinction? Again, i have a list of stocks that i like and think are good for long-term. so, it shouldn't really matter which stock I throw in which port, right?"

The difference is that you can trade in your IRA without paying taxes. You are limited as to how much money you can hold in your retirement account. A stock that does not pay dividends and which you are honest to gosh going to hold for decades, you can hold outside the retirement account and not pay taxes until you sell it, which can be decades. A stock which you are going to watch double, then the stock runs out of steam and the chart doesn't look so hot, perhaps you would like to sell and buy something more promising. This is called market timing, which we know doesn't work, but we succumb to the temptation of trying. Or if you are going to have a stock that pays significant dividends, you don't pay tax on the dividends in the IRA until you take the money out, and then it is taxed at your regular tax rate.
If you hold a stock for 6 months outside your IRA and then sell, and the stock has done well, this can add a whopping amount to your current tax bill. You look at that stock and say "why didn't I put this in my IRA?" Similarly, if a stock in your IRA has done poorly, and you sell, you can't declare a capital loss for tax purposes. If it is a traditional IRA, at least you don't pay taxes on the money you will never take out because you lost it; if it is in a Roth, you get no sympathy from Uncle--unless you finally cash out the whole thing for less than you put in, and that is far away.
So, in retrospect, the stocks in your IRA should be those which you will trade, or which pay dividends.
Very long term buy and hold stocks that do not pay dividends go outside the IRA.
Which are which? Easier to know in a few years. But those are the principles and you do the best you can.
Good luck! Chris

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