Question : What is the difference between a mutual fund and an IRA?
I'm saving for the long run........if I put the money in a mutual fund can I make withdrawels ( if necessary ) without restrictions or financial penalties?.......but if I put it in an IRA, i can't touch until 59 1/2 years of age?
- asked by videogamer1979
All Answers:
Answer #1
For mutual fund investments...you will be TAXED onthe gain (either short-term or long-term capitalgains) on the shares you sold (increased in valuefrom the time you bought them), and you are freeto do so at any time. You will also be taxed onany income or dividends paid on your shares, inthe year received, as ordinary income.An IRA doestie it up, but you pay nothing for gains or incomeon the IRA account until the time you start makingyour withdrawals later in life.
- answered by Nancy Kay
Answer #2
Don't buy mutual funds for the long run. They'renot good investments. The problem is the fees thatare involved. A mutual fund is a pool of moneyfrom a number of investors which is then investedand managed by a fund manager and usually his/heremployees. This inherently means you get lowerreturns than if you bought stocks.The reason is,the fund manager and employees all have to getpaid, which cuts into your earnings. This makesthem less attractive, so they often pay advisersto recommend them. This further cuts into yourearnings. As a result, stocks are a much smarteroption. The IRA isn't a bad idea, and there aredifferent kinds of IRAs you can invest in.
- answered by STEPHEN J
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