can i buy pink sheet stocks in a roth?

[Guest ethannyc1]

obviously i am aware of th risks, manipulation, etc,....but w/ time on my side, if i find some good ones fo the long haul, it'd be nice to KEEP all the profits! do some banks or b/d's have differet rules and resrictions, or can i do what i want, when i want with who i want? how about commissions? are some better than othrs? any recommendations are much appreciated. thanks in advance.

[John G]

This is not an IRS issue but rather a custodian issue. Many custodians choose to limit the range of investments allowed in a IRA/Roth for practical reasons. They have fiduciary responsibilities and that can include limiting the kinds of investments due to your investment experience, income level, assets and self declared risk tolerance/objectives. IRA investments must be valued at the end of the year, so some custodians will limit any investment they perceive to be problematic.

All that said, you will find many custodians that will allow you buy pink sheet stocks.

I would recommend against pink sheet stocks for any investments and especially retirement accounts.

Reasons: there is less reliable information on pink sheeted stocks, bid/ask spreads tend to be higher, lack of trading volume means fewer buyers and sellers and therefore you are drifting away from a rigorous market based price for the stock, pink sheet stocks are more likely to be subject to manipulation (including organized mob activity), it is harder to transact any significant size block of shares with illiquid stocks, and why work so hard when there are probably over 10,000 publicly traded stocks to consider.

I have no idea what you mean by "keep all the profits". That is how any other stock purchase works. This comment suggests to me that you may not have a lot of investment experience.

There is nothing magical about pink sheets. You will rarely be a successful investor if you are looking for long shot winners. Once you get outside the S&P500 and Nasdaq 100 stocks, there are plenty of interesting companies with limited institutional ownership and few or zero analysts following them. If you think your analytical skills are sharp, you might be better off searching in this more actively traded group.

[Guest ethannyc1]

by "keep all the profits" i was referring to my attempt to avoid taxes upon realizing gains when i sell. any idea which custodians tend to be the most tolerant?

[John G]

Sounds like you are talking about active trading in pink sheet stocks... I do not recommend this. Even investors with sophisticated knowledge and many years of experience find this difficult. It eats up more time than listed stock investing, it is harder to diversify, your orders to sell/buy will often move the bid/ask prices (as in YOU are the market), etc.

You may be falling for the investor version of "the grass is greener on the other side of the fence". Every thing you think you can do with pink sheets you can do more efficiently and more reliably with listed stocks.

Who might support your activities is not just a function of the general custodian rules but also who you are, your education, investment experience, annual income and assets. You will need to make some phone calls.