Discovering the ROTH

In May 2010 I discovered the advantages of the ROTH. The big advantage is that profits are tax free. The disadvantage is that losses can’t be written off. Hmmm. I’ll just have to make sure I don’t lose money in the market in my ROTH account. Can that be done? In a word, mostly.

I already had a brokerage account and I didn’t want to close that. So I opened the ROTH, signed the papers at the Scottrade office and put $500 in. Then the flash crash happened in early May 2010. And I figured the market would get spooked. I sold my Apple stock for a nice profit (26 shares) and took the proceeds and moved the money into the ROTH. And then I bought the stock back along with some Sandisk and Anadarko (which came in big for me) in the ROTH.

I have countless transactions in both my Roth and the brokerage account. But I’m a little more selective now. The ROTH is a retirement supplement for me. I put high yielding dividend stocks into that account. Dividends pay cash without having to sell the investment. Growth stocks that pay little or no dividend require the investor to cash out, removing any chance of future profit from the equity. So you’ll see me push dividend stocks for that reason. And they fit perfectly into a Roth for tax purposes.

More later.

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