August 6, 2007
One of the greatest advantages of a tax-deferred retirement plan, such as an IRA or Roth IRA, is that you can sell an appreciated asset and not pay taxes on it.
The typical investor in a stock fund hesitates to take profits. He thinks, "If I sell now, I'll have to pay capital gains taxes." So, he has to be really scared of a falling market to have the courage to sell.
He gets scared after he has lost more than the capital gains taxes would have cost him.
But in a tax-deferred account, you can sell when you think you should, irrespective of taxes. This frees you up mentally.
This is one reason why you need assets you want to trade in your IRA -- because you will have the courage to sell when you should.
Don't put real estate or gold coins in an IRA. Put stocks and bonds there -- and be ready to sell when the market moves against you.
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