Buying Individual Stocks in Roth IRA ( AMZN)

[wealthviahealth]

Super rookie question here but I am wondering what the pro's & con's of buying individual stocks in a Roth IRA might be from this communitie's perspective. My Roth IRA is about 80% invested in a low cost index 500 fund but I recently sold all of my shares in a target date fund from pre-MMM days. I was going to dollar cost average these funds into my index 500 over the coming days but have been wondering if it could be a good opportunity to buy some more expensive individual stocks like AMZN and APPL considering I have enough cash from the target date fund to buy these without "saving up". Would love any thoughts on the various implications of this.
Quick background- I ma heavily invested in index 500 in my HSA, 401k, and various etfs in brokerage accounts so these amazon shares would be a very small portion of overall portfolio and I am about 15-30 years away from a "traditional" retirement.

[Buffaloski Boris]

My, my. You just opened a can of worms. I’ll give what I hope is a fair “lay of the land.” Most people here are strongly opposed to buying individual stocks. They can point to credible evidence that most people who invest in individual stocks do a really crappy job of it. Then there is a minority here who think that so long as you use your head*, you won’t be “most” people.

I’d be a subset of the second group. I do individual stocks, more of a hobby than anything, and it isn’t a very significant part of my portfolio. I also don’t like the more popular index funds as I think that the US market is overpriced relative to the rest of the world, and I don’t like cap weighted indexes. I think there is a lot of potential for tailoring your own index in the future based on zero commission stock trades and fractional shares. We’ll see what evolves though.


*(be moderate, diversify, look at stocks other than the names you know, etc.)

[Bernard]

I have a ton of AMZN stocks in my IRA accounts. I bought them at around $300 and watched them hit $2,000 twice, so they are huge winners in my portfolio, so huge that the profits make up for a lot of losers I also still hold. While I believe Amazon has potential to go much higher in the future, given that they are now taking over the UPS/FedEx market as well, I wouldn't buy in at $1,850 per share unless you have a long horizon.

If you want to gamble, you may want to look at Tesla or Roku. I don't hold Tesla as it's to high for me now but I wish I had bought in at $200 about 6 months ago. I did buy Roku at $36 to $40 and I believe they may go much higher than the $170 they already hit. But all of this has a gambling component to this. I personally think 80% in low cost index funds and up to 20% in individual stocks is not a bad ratio.

[alienbogey]

I'm in the minority here and think it's perfectly fine to purchase individual stocks with retirement targeted funds, so long as you do so fully aware of the increased risk.

Our approach, which we've followed since 1996, is that our 401k monies are invested exclusively in mutual funds.  Our IRA monies are allowed to be invested in individual stocks and - hold on a second while I go check - are currently 98% invested in seven individual stocks.

Our total tax-protected investments are 31% individual stocks and total investments are 38%.  That percentage is as high as it is mainly due to the fact that the individual stocks have done so well.   :)

Folks on the other side of the debate will doubtless chime in, but we're comfortable because we've put a moat around the 401k (mutual funds only) and are willing to assume more risk with the IRA's.

[Davnasty]

It's not clear to me what you're asking. If you could clarify a few points, you may get better answers.

I am wondering what the pro's & con's of buying individual stocks in a Roth IRA might be

Is your question about buying individual stocks within a Roth IRA vs. some other type of account? In other words, is this a tax question?

but have been wondering if it could be a good opportunity to buy some more expensive individual stocks like AMZN and APPL considering I have enough cash from the target date fund to buy these without "saving up".

Is your question about having enough cash on hand vs. saving up for it?

been wondering if it could be a good opportunity to buy some more expensive individual stocks like AMZN and APPL

Are you asking for fundamental opinions about buying individual stocks?

Or are you specifically asking if AMZN is a good investment right now?

[MustacheAndaHalf]

If you can afford high priced stock, and can buy individual stock, you should be able to buy ETFs.  You could buy iShares Total Stock Market (ITOT) for $73/share, and hold thousands of U.S. stocks.  Or you could get some international diversification with Vanguard Total International (VXUS) at $56/share.

[MoseyingAlong]

Super rookie question here but I am wondering what the pro's & con's of buying individual stocks in a Roth IRA might be from this communitie's perspective.

Roth IRA specific pros & cons
Pro - growth is tax free
Con - losses are generally not tax-deductible (exceptions for liquidating entire account)

Individual stock picking has other issues that others are addressing

[talltexan]

I don't recommend owning a massive stake of the employer's shares in your 401K because you already depend on them for your labor market income. It's a move away from diversification.

[dabighen]

Keep to no more than 10% of your net worth and have some fun.  The rest keep right in your s&p index find.

[Car Jack]

I'm not a fan of playing around with stocks.  Too much gambling behavior rather than investing.  That said, I buy one stock for one main reason.  BRK/B.  Why?  They pay no dividends.  The company owns a bunch of companies outright and high percentages of another bunch of companies and then a scattering of yet more company stock.  Some people consider it almost a total US market fund within a single stock.  I'm in it because I do feel its that but more importantly, I don't want the taxable dividends spilled into my account.  With BRK, if I don't sell, I have zero tax liability.  For maybe a year, I've put all new taxable money into BRK/B.

Moving forward, I do have positions in taxable of VTI and SCHB, which will need to be spent.  I'm not far from retirement, so am not overly worried about them.  When they do spill dividends, they are either sent to my checking account or used to buy more BRK/B.

[ChpBstrd]

If you can afford high priced stock, and can buy individual stock, you should be able to buy ETFs.  You could buy iShares Total Stock Market (ITOT) for $73/share, and hold thousands of U.S. stocks.  Or you could get some international diversification with Vanguard Total International (VXUS) at $56/share.

Another thought is if the OP has everything else invested in S&P 500 funds, maybe they should diversify away from large caps to get some small cap exposure. VB would be my choice here. If you want to make it fun, buy it by selling a put option.