Defining Investment Accounts
Investment accounts can be defined as either a 401k, an IRA, a personal account or the account of an inheritor, all of which have their own characteristics that are better for different types of investments. Find out which accounts are best to invest short term or long term with information from a portfolio manager in this free video on investing.
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When you buy stocks or bonds, do you put them in your 401K plan? Do you put them in your IRA? Do you put them in the names of your children? Or do you invest in them personally? Well, each one of them is an investment account, and I'm Roger Groh with Groh Asset Management. I'm here today to talk a little bit about the advantages or disadvantages with both. If you think that there is going to be substantial capital gain coming out of a stock, perhaps having that in your personal account may not be such a bad thing. The reason is that today, capital gains tax is limited to fifteen percent of the total gain which seems reasonable if the gain is significant. On the other hand, if you own a stock or a bond that pays a significant cash dividend, perhaps investing, putting that, perhaps buying that inside of your tax exempt vehicle, 401K plan, or an IRA would be more beneficial to you. The reason is that you won't be taxed in those dividends until you begin to draw money out of your 401K plan or other retirement account. In addition, those types of businesses may be a little more stable than pure growth companies. So taking tax into account, in terms of the style of stock or bond that you're buying is really important. One other thing to consider when you consider the different types of investment accounts, in all likelihood at some point in late two thousand and nine or two thousand and ten, taxes are going to go up again. Now in each state, it's going to happen a little bit differently, but we know that every state and the federal government are hurting for cash, and in the end, that's going to mean higher taxes for all of us. So where you put those types of investments and the net profitability after tax may be accentuated even more than in today's market. So thank dividends if they're from stable sources. Go in tax exempt accounts. Pure growth companies where you're looking just for capital gain and don't have a whole lot of income, they should go in your own personal accounts. Taxable accounts. I'm Roger Groh. That's a little bit about investment accounts and thank you for spending a little bit of time with me.