Here's a quick Q&A about Roth IRAs, index funds & when to buy and hold.
Dear Mr. Town,
I'm 22 years old and want to start investing. I have $6000 and want to max out my Roth IRA contributions by putting $3000 in a Roth, and investing the other $3000 normally, meaning not in a retirement fund. I was planning on investing $3000 in an index fund (either VFINX) or the Domini Social Equity Fund (DSEFX), and the other $3000 in stocks.
So here's my question...Should I put the index fund in my Roth or invest my stocks there?
Thanks for your help!
Mike
My response:
Michael,
You should invest inside the Roth just like I showed you at the seminar. Use the arrows and get out. Outside the Roth, invest in the same businesses, obviously, as inside the Roth but pay taxes on the gains. The only time we ever just buy and hold is when we can get in cheap after the entire market has crashed. We only buy and hold when the thing really can't lose another 50% of its value while you hold it. We're a long way from that place. You'll know you're there because people will be agonizing over how bad the stock market is and how much money they lost. Be patient. That time will come again.
Meanwhile, use the arrows, pay the taxes on your gains and be happy that you will be in cash when this thing crashes.
Now go play.
