4 Reasons to Buy Stock in Your IRA Account

Currently, you can invest $5,000 a year in an IRA account. Investors over 50 can contribute $1,000 more thus making the total annual investment amounting to $6,000. Various institutions such as banks and brokerage firms offer certificate of deposits, mutual funds, and other investment choices. The investor has complete control and makes the ultimate decision of what type of investment to make.

Opening an IRA account at a brokerage firm offers many options. Not only can you purchase certificates of deposit but you can also buy stock. Having the ability to purchase stocks and include them in your IRA has benefits.

Four reasons to buy stock in your IRA account:

Fees

You don't pay a maintenance fee if your account is under a required minimum. You also don't pay a management fee to the fund manager.

Mutual funds charge a maintenance fee. This fee is small ($10) but will be automatically deducted from your account if your assets go below the desired minimum. For example, if you are required to open an account for $2,000 and the value of your assets fall below $2,000, you will be charged the maintenance fee.

The fund managers charge a flat fee for managing the mutual fund. There are no industry standards and the cost for this service varies significantly among various brokerage firms. Annually, you lose a portion of your investment due to these fees.

Capital Gains

You don't have to pay capital gains taxes.

Hopefully, you buy stock for a lower price than what you sell it for. The difference between the amount you paid originally and the amount you sell it for is a capital gain or a capital loss. You have a capital gain if you sell the asset for more than you paid. You have a capital loss if you sell the asset for less than you paid.

Capital gains and losses are classified as long term and short term. If you hold the asset for more than one year before you dispose of it, you capital gain or loss is long term. If you hold it one year or less, your capital gain or loss is short term.

All earnings within the IRA have no tax impact. Capital gains and losses within your IRA account are not applied to your annual income. You can make multiple short term capital gains on your investment without paying additional taxes.

Flexibility

A novice can make money buying stocks. Buy any stock at a low price and sell it at a higher price. It's that simple. Keep the stock a day, week, or month and sell it for a higher price. A bear market can be your best friend. The buyer is in total control of how much money will be made for each transaction.

Deduct the amount paid to buy and sell the stock. For example, if it costs $19.95 to buy a stock and $19.95 to sell a stock, you will have to add this amount above what you intend to make. If your objective is to make $500, you will have to make $539.90 to clear the intended amount.

Brokerage houses compete for your business. Some will charge you nothing to make a transaction. If you plan to do a lot of buying and selling, you need to shop around for the most competitive brokerage fee.

Income

Securing your financial future is the number one reason people are investing in an IRA and saving money. There are over 2,000 company stocks that pay quarterly dividends. These dividends have been consistently paid for the many years.

You can establish a monthly income using dividends. There are 3 dividend payment cycles. Note the following:

· Cycle 1 - pays dividends March, June, September, and December

· Cycle 2 - pays dividends January, April, July, and October

· Cycle 3 - pays dividends February, May, August, and November

Having multiple companies that pay dividends every month of the year can help you create an unlimited monthly income. You will be able to test your income without tax penalty, when investing through your IRA account.