Ryan Nicolos
11/20/15
Business
The Roth IRA
Many people out there know that saving early is key to future financial security, but not many are aware of exactly how beneficial a Roth IRA can be and how easy it is to open an account. Ever since the birth of the online discount brokerages (i.e. ETRADE, Scotttrade, Kingstocks, etc.) investing has never been easier. Signing up for an account will take you a few minutes. You will be asked common identify questions along with which type of account you would like to open (IRA, Roth IRA, Brokerage, etc.). Then the broker will take a few days to confirm your identity, and then just like that, you’re ready to start investing! Wait, you mean I have to pick my own stocks? No….. You GET to pick your own stocks. But I only have a few hundred dollars to invest? Good, me too. But I can’t buy any shares of Apple or Google? You’re exactly right, time to have some fun and start researching undervalued companies. Start first by picking an industry you know well, could be anything (fashion, sports, cars, pens, doesn’t matter). Then ask yourself, what kind of transactions occur in this industry that generate the most profit for a particular business and what trends do I see happening in the future. For example, let’s say you know a lot about football. Well that’s great, what channels are the games usually broadcasted on? Why those channels, are there other networks competing for those same broadcasting privileges? Let’s say you research it and find out that Nickelodeon is making a comeback and some data you found suggests that they might get those privileges in a year. If you believe your source, you find out if Nickelodeon is a publicly traded company and you start investing what you have in them. The lower the price of the stock the more you need to be comfortable with volatility. A stock that is not listed on a major stock exchange and is instead traded on the OTC market (over the counter) with a share price of 30 cents will fluctuate like crazy throughout the day. Make your picks and sit on them, especially in a Roth IRA. You won’t be able to touch the money until you retire, unless you want to pay hefty tax penalties. Hold on a sec, if they fluctuate a lot, why don’t I just buy at 10 cents and sell at 15 cents? Well one, you will pay a fee (usually around 10$) every time you buy and sell a company’s stock, regardless of how many shares are evolved. That alone is enough to stop people from doing that. Second, penny stocks are penny stocks for a reason. They have an unproven track record and are highly susceptible to going out of business. My recommendation is to start small, only invest a few hundred dollars to get the hang of things. Try it out for a year, have some fun. Once you get the hang of it, start contributing more, but know that the current max contribution per year for most people in a Roth IRA is 5500$. So why a Roth IRA and not a regular IRA? Well, once you’ve made your millions with all you’re really smart decisions and your 60 years old looking at your account on a beach in Hawaii and you need to withdraw some funds for some machitos, that money in your account is completely tax free. That number you see and the one followed by all those zeros is all yours and nobody else’s. Be smart, invest young, and have fun.