How to use stock market trading with a self – directed IRA account

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One of the advantages of setting up a self-directed IRA is the added flexibility it provides. While your 401k or 403b plan might provide only a handful of choices, rolling over that account to a self-directed IRA gives you a host of new investment options.

Individual Stocks

If you set up a self-directed rollover IRA, you can use that fund to buy and sell individual stocks. If you do plan to include individual stocks in your rollover IRA, you might want to choose a low cost online broker to administer your plan. Once the plan is set up, you can buy and sell stocks as you see fit. And since those stocks are held within a tax-deferred account, you will not incur capital gains taxes when you sell stocks at a profit.

Exchange Traded Funds

Exchange traded funds can give you many of the benefits of a mutual fund, combined with the ability to buy and share the shares on the open market. Many of the most popular exchange traded funds track widely used indexes, including the Standard and Poor’s 500 and the total stock market index. If you have a self-directed IRA you can use your account to buy and sell exchange traded funds as you see.

Mutual Funds

If you roll your 401(k) or 403(b) fund into a self-directed IRA with a mutual fund company, you gain access to all of the mutual funds that company offers. Some mutual fund companies also provide access to funds offered by other companies, giving you a wider universe of kinds to choose from.

Certificates of Deposit

If you want to limit the risk in your retirement portfolio, you can invest part of your self-directed rollover IRA in a certificate of deposit. The money you invest in a CD is insured by the FDIC, protecting your principal while you earn a bit of interest. Of course the interest rates on certificates of deposit tend to be quite low, so you might not want to invest your entire IRA rollover that way. But if you are nearing retirement and need to keep the money you need for the first couple years of retirement safe, a CD can be a good choice.

As you can see, a self-directed IRA gives you a lot of choices, but it’s important to know how to make the right decisions. Start with the above tips and work your way up!

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