Smart Reasons to Save, Use and Invest Money

Why I Enjoy Investing In A Roth IRA

First let me start out by saying that I’ve been neglecting my Roth IRA.  I’ve been neglecting it by not contributing to it in the past two years.  Ironcially, I really do enjoy investing in a Roth IRA though!

I’ve been neglecting it, and instead building my regular brokerage account balance.  One reason that I haven’t contributed to it is because I’m trying to build up an dividend portfolio in my regular brokerage account, and in the process I decided not to put the money in a Roth IRA.

But secretly, the real reason that I haven’t been contributing is because I’m trying to increase my account balance via investing means, actually more like active trading.  Oh sure, I have most of my money in my Roth IRA invested in a solid dividend stock because Roth IRAs are the perfect dividend shield   But I also have about 10% to 25% invested in stocks that I trade weekly or during big dips in the market.  I also have a cash position to take advantage of big dips during down stock market days too.  It’s a fun activity and lately, I’ve become more refined at it.  I’ve found that the less desperate that I am since I have some money saved up already, the more cool I am when I make my purchases.

 

Buy Low Sell High

Yep, since I’m pretty cool headed with the small percent of the Roth IRA that I actively trade, I’m able to buy low and sell high.  I never hit the absolute high or the absolute bottom, but I still make my margins which makes it fun.

The advantages of playing in my Roth IRA are as follows:

  • Any capital gain that I incur isn’t taxed!
  • Any dividend that is distributed isn’t taxed either.
  • The amounts are small amounts and if I lose money it won’t bother me much
  • I use the money to buy during dips in the market, this has work out great!
  • I don’t have to worry about keeping track of all my stock transaction (although I still do keep all of the trading slips that are mailed to me).
  • Since I keep a part of my Roth IRA money in cash, that cash serves as a stealth emergency fund

In chess, a Roth IRA is like the queen piece.  It’s very powerful and far reaching!

 

The disadvantages of playing in my Roth IRA are as follows:

  • I can’t take any capital gain losses if they were occurred.
  • Once I pull the money out for an emergency, I only have so long to put the money back in else wise I can’t put it back in.  While this isn’t a true negative, I miss out on future tax free growth that the money could provide… and this would be a tragedy!
  • My Roth IRA can make me rich some day, oh wait… that’s not a disadvantage!!!

 

As you can see, just from a fun perspective, the Roth IRA is the best thing since sliced bread!

MR

12 Responses to Why I Enjoy Investing In A Roth IRA

  1. Sounds like a Roth IRA is such a good deal that you ought to stop neglecting it.

  2. lol, yes you are right! actually, this is a two parter… This is just part 1.

    In a future article (this week or next week), I’m going to refer back to this article. :)

  3. MoneyCone says:

    And you can even use upto $10K of your Roth money towards your first home! (Not a good idea, but an option nevertheless)

    • Yes, and that’s just the earnings. You can pull all the amounts that you contributed to the Roth IRA for any reasons. It’s a great tool.

      That said I doubt that I will pull out earnings or contributions until I retire (an maybe not even much then either).

  4. Great and fun post. I like your point about not being desperate and keeping cool when you make your trades. Nice example of your Roth being your queen piece, too. I’m trying to adopt a more fun, laid back, cool approach. My former trading self, emotional, out of control, desperate yielded less than stellar results.

    • I was the same way, then I went thru a phase where I would pick great stocks, but ride them back down again (esp. solar). Now I’m more methodical with my approach to gains. I usually sell and buy in thirds. Nice and easy.

  5. Good points!!! You make a great case for the Roth! I like your analogy of the queen in chess!

  6. A Roth is really the perfect account to take chances with. If you hit a home run with your investments, you can withdraw them tax free after age 59 1/2. It doesn’t get any better than that. Imagine trading a few thousand dollars into a million plus over 20-30 years and never paying a dollar in taxes on it…

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