Is it possible to have an IRA with a broker and purchase stocks

[Guest awatts]

I and my wife have IRAs through mutual funds. My question is can we set up an IRA account with a stock broker, contribute say $2000, and then direct the broker as to a stock(s) to buy? And then sell later and invest in another stock, all as part of a tax-deferred or tax-free IRA.

[QDROphile]

You may have a brokerage account, but it has to be an IRA custodial account or an IRA trust. The account canot be simply a brokerage account that you deem to be your IRA. All the big brokerage houses have such IRA arrangements, and there are other IRA custodians that allow trading in any security whether or not you use an affiliated broker. You cannot pay the commissions on trades outside the account, the way you may pay your account maintenance fee outside the account, but don't expect the broker or custodian to tell you this. Most of these trading account IRAs will charge you account fees higher than you are paying for your mutual fund IRA.

[Guest John R Grossmann]

It is hard to "efficiently" invest in stocks with just a $2000 account. You get eaten up with commissions and it would be hard to obtain a balanced or diversified portfolio because of the small account. I would recommend that you stick with mutual funds until your assets grow. For example, you could use an S&P index fund and a growth fund for your IRA and get very satisfactory results for the next 10 years. If you really want to own individual stocks (especially if you plan to trade often) then you need to consider sending your IRA to an online brokerage like Etrade, Ameritrade, DLJ etc where you can trade for less that $20. One of the good points of IRA investing is that you don't worry about your holding period. From my perspective, recordkeeping is much simpler too. Good luck.

[Guest awatts]

Thanks your replies.

I have done some more investigation and it seems Waterhouse (among others) has a brokerage account which can be set up as a Roth IRA. One deposits or transfers his IRA funds, or IRA mutual funds, etc, and can then self-direct sales and purchases. They have no IRA account maintenance fees. Some mutual fund purchases are without a fee, some have a fee. Stock trades are reasonable, about $12.

Comments about trading with only $2k are well taken. My intent was not made clear in my first post. I would start with $2K just to set up a 1999 Roth IRA account, and probably put it into one of their 'sweep' money market funds, temporarily. Assuming that setup of the account went smoothly, I would plan on transferring some of my other Roth assets into the Waterhouse account and then begin some investing in stocks.