Roth IRA vs. Individual for Trading

P

pcgeek86

Good day ET,

I currently am 20 years old, have a relatively small individual trading account. I recently opened a Roth IRA, but have not funded it yet, simply because I am worried about not being able to remove the funds except for things like first-home, major medical bills, or once I reach 59.5 (quite a ways off :D).

I'm curious to know what everyone's recommendation would be for my trading account. Right now, as I said, it's just a standard individual account, which means that I am taxed somewhat heavily on capital gains. Am I better off contributing to my Roth IRA so I don't get taxed on my gains? I really like the fact that your contributions aren't restricted in an individual trading account, and I do contribute more to that per year than the Roth IRA maximum limit. Perhaps I should contribute a little to each?

My goal over the next few years is to eventually build up a large enough account that I can trade for a living, and quit my day job. Since this would require removing funds from my account, I'm kind of thinking about sticking with my individual account primarily ... and maybe making small contributions to the Roth. Any thoughts, or other alternatives I ought to be considering?
 
(1) Do one or the other but not both. (2) If you want to trade, just trade AND don't be concerned with taxes. (3) If you're an "investor", contribute money to an IRA and focus on your school work. (4) If you lose money, you'll have plenty of time to make it back. (5) You should have atleast 6-to-12 months of living expenses in an interest bearing checking account before trading or investing.
 
Quote from nazzdack:

(1) Do one or the other but not both. (2) If you want to trade, just trade AND don't be concerned with taxes. (3) If you're an "investor", contribute money to an IRA and focus on your school work. (4) If you lose money, you'll have plenty of time to make it back. (5) You should have atleast 6-to-12 months of living expenses in an interest bearing checking account before trading or investing.
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Hey, thanks for the input. I've got a day job, so I'm covered in the event of a severe failure, but I do have a few months of savings to go through before I burn out. Maybe I will just focus on the investing, as that's where my long-term goal is anyway. I wasn't sure if putting a small amount of funds away in a Roth IRA would be beneficial as a retirement backup in case the day-trading doesn't work out.
 
i disagree with the do not speculate in retirement accounts

the point is ASSET ALLOCATION

do not speculate with (anywhere near) all your money in retirement

speculating with some is incredibly prudent. and the great thing about a roth is that you can make Hyoooooge gains and never pay a cent

i have a rollover IRA account, a deferred compensation account, and a roth IRA. i also have a very big vested stake in a retirement fund that i have no control over whatsoever

i speculate in 50% of my roth holdings.

even if i were to wipe that out, that would only be a small part of my retirement holdings in general (and i'm not even mentioning social security- cause that sux)

every cent of my speculation money in my IRA is profit. iow, my original capital is entirely safe

speculation offers incredible potential for massive gains. being able to do that in a tax free account is a big +

not doing it would NOT be prudent imo
 
Quote from pcgeek86:

Good day ET,

I currently am 20 years old, have a relatively small individual trading account. I recently opened a Roth IRA, but have not funded it yet, simply because I am worried about not being able to remove the funds except for things like first-home, major medical bills, or once I reach 59.5 (quite a ways off :D).
More...

I say keep it in the Roth IRA. Suppose just for a second that you put the time and effort into trading and do very well and start to earn 50% a year. By the time you are in your 40's your IRA will be large and you will have a proven track record.

If your account is large and you want to retire on it you can pull the money out with the penalty and then trade from it. There are various ways to do this.

If you don't do that well, then at least you have the money in a self-directed IRA which is advantageous psychologically and financially for many reasons. And, to be honest, most people will not make it as a trader, so again this is the safest route.

But let's say you have a couple million, because you're the next Dan Zanger. Well, so what if you pull out a few hundred thousand with the associated penalities, right? Because you're Larry Williams, Jr. you can trade that money for income for years to come.
 
To keep it simple, I would trade with your risk money and invest your retirement money. As your assets grow you can adjust this methodology, but for starting out it's a simple way to go.
 
At your age, these decisions are not ready for the making...Date girls and find your wife.

all of your concerns, will fall into place.

But not now.

Michael B.
 
What if the trades dont go your way in the retirement accounts?

There are three types of players in the market...

1. The ones who have lost a lot of money.
2. The ones who are about to lose a lot of money.
3. The ones that lie about never having lost any money or deny that they will lose money.

The longest bull market in US history was during the 90s for exactly ten years. Im saying the current bull market is long in the tooth and the 20 year old poster wont be able to handle it when the trend suddenly changes.

Lets take a look at a chart of Microsoft. Notice how the trend suddenly changes in May dumping down as if someone hit their HQ with a bomb. Now thats a real correction and anyone on margin would have been cooked. Would the 20 year old poster have the maturity and knowledge to handle a correction like that?

My advice would be to place the cash in a balanced index fund (bonds and equities) and have him paper trade for 6 months. Otherwise he will get discouraged when the trend sharply changes and he finds himself out a lot of coin.



Quote from whitster:

i disagree with the do not speculate in retirement accounts

the point is ASSET ALLOCATION

do not speculate with (anywhere near) all your money in retirement

speculating with some is incredibly prudent. and the great thing about a roth is that you can make Hyoooooge gains and never pay a cent

i have a rollover IRA account, a deferred compensation account, and a roth IRA. i also have a very big vested stake in a retirement fund that i have no control over whatsoever

i speculate in 50% of my roth holdings.

even if i were to wipe that out, that would only be a small part of my retirement holdings in general (and i'm not even mentioning social security- cause that sux)

every cent of my speculation money in my IRA is profit. iow, my original capital is entirely safe

speculation offers incredible potential for massive gains. being able to do that in a tax free account is a big +

not doing it would NOT be prudent imo
More...
 
hangingman, if they don't work out, then you take your stops

again, my speculative portion of my retirement funds is 1/2 my roth IRA and is composed ENTIRELY of profits (iow, it is profits i made off of my original roth investments)

my entire ROTH state is only about 1/5 of my total retirement funds.

so, if i lost ALL my roth speculative stake, that would be less than 1/10 of my retirement funds AND that is not including SS

but not having a small portion of your retirement in specs is a bad idea imo. spread it around, and try to bag a 100bagger

my IRA and retirement funds are pretty conservative. i've been in stocks like BA, JNJ, MO, PG, XOM, some gold, some oil, etc. for many years.

but spec'ing is spec'ing and giving it up would be stupid imo

again, ASSET ALLOCATION. dedicate a small portion of your retirement stake to specs.

here's some specs i've bought recently: BQI, CHINA, OTD
 
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