Expert: Paul Henneman - 2/19/2008

Question
Hello,
I am am 17, and have managed to save up a couple thousand dollars, which i am looking to invest.  I have begun to read Investing for dummies in order to gain more knowledge on stocks and the subject. I am looking for long term investments.  And I was wondering if their are any investments that have tax advantages.

Answer
Tyler,
   Thank you for your question! Yes, the best thing you can do with your investing is to consider it long term, and take into account taxes.
   ROTH IRA and IRA accounts are types of accounts that can be set up for retirement. The tax advantages are very significant, and you can buy or sell mutual funds, stocks, cd's, and most other major forms of investment within the ROTH IRA or IRA account.
    There are maximum limits that you can invest into such a retirement account, currently it is $5,000 for the year of 2008.  Also, there are income limits in that if you make over a certain amount, you cannot contribute to a ROTH IRA, only an IRA.
    There are important differences between the two accounts. Investing for Dummies summarizes these, but I'll review the basics here. Both accounts are designed for retirement, so there are penalties if you withdraw the funds before you turn 59 and 1/2 years of age. With a standard IRA, you can take a tax deduction each year for the amount you contribute, as long as your work does not provide a retirement type of account (such as a 401k) for you. You do not pay taxes on the profits of the investments each year, but you do pay taxes on the 'distributions' (withdrawls) for an IRA account when you retire. However, with a ROTH IRA, you do not pay taxes when you retire.
  It is simple to set up an IRA account. When you create an online trading account at any major service, there will be a choice as to what type of account you want to set up to buy and sell your investments. Both a ROTH IRA and IRA should be listed. Some of the services I like are www.FOLIOfn.com, www.Scottrade.com, and www.TDAmeritrade.com
    These tax advantages are very significant, I do hope you look into setting up a ROTH IRA, or standard IRA if you do not qualify for the ROTH.
    I hope that this helps! Please do not hesitate to follow up with me if I can be of any additional service,

Sincerely,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com