Stick with the individual account for trading for now and put the Roth in index funds. Chances are, you'll lose money trading, at least in the beginning, and you'll get the tax benefits of those losses in your individual account, not in your Roth. Sorry to paint a bleak picture, but you should look at the other side of the coin as well. If you happen to have a system that is very profitable, then I'd have no problem using the Roth for that, but you could always do that down the road, once you establish a track record of profitability.
I agree that you shouldn't actively trade with your retirement accounts, particularly with a ROTH. Reason being that you can't deduct losses, and that you are limited to $4000 input annually (unless you have a roth 401k) and there is an income cap on the roth, so if you start doing well, you might not be able to contribute any more to it in the future. Roth's are amazing because you can essentially create the equivalent of a dynasty trust through it. For further info, go read Ed Slott's books on how to do this - financial advice worth purchasing, IMHO. It is complicated and tricky, but very remunerative. Personally, I am building a very conservative asset allocation in a roth (currently a ND IRA, to be converted in 2010), including CASH, TIPS, and index funds with a value or international bent along with short term bonds, possibly some floating rate or high yield bond funds too depending on how these sectors do. Then I'll just sit on it. If that isn't sexy enough, consider closed end funds for your asset allocation, buying at discount and selling when the discount closes. Once I am sufficiently diversified, I plan on including them in the roth. Roths are too valuable to waste on losses. More volatile stuff should go elsewhere, so you can at least take the tax deduction if things don't pan out.
again, i totally disagree dedicate 1/10 of your ROTH to specs, if you want to be conservative, but not having specs in a tax free account is missing out on major opp's imo
Wow, this is all great advice ... thanks all for the input thus far. @thehangingman: My original intent was to put a small amount of my capital into the Roth and simply invest in a mutual fund. I may, as someone else suggested, end up trading it a bit more actively if I develop a good, profitable trading strategy, but my plan was simply to get something started so that I could take advantage of the time value. I guess I wasn't really sure as to whether or not taking advantage of the non-taxed, but deferred payment would be in my best interest or not. @whitster: I like your idea of putting at least a portion of the Roth into specs, as risky as it sounds. The $4k/year contribution limit is pretty .... limiting, and to avoid some potential large gains seems kind of pointless. @drsteph: You do have a point with keeping losses out of the Roth, and I like the idea of just putting the assets in the Roth into a fund. Again, the limited contributions make low volatility in the Roth a plus @moneyball: I don't consider it a bleak picture, I look at it as reality, so thanks for pointing out the fact that failure is a possibility. Good reason to keep my trading outside of my Roth .... for now @ElectricSavant: me thinks I won't find anyone with the same goals as me. Nice thought though It sounds to me like there are several different long-term strategies ... I suppose I need to figure out for myself what will work best based on my income and trading strategies ... I appreciate all the input
assume for the sake of argument, you have 4k in your roth 10% would be $400 obviously, that's not a lot. but assume (for the sake of argument) you buy 4 different spec stocks all at $2 a share you could buy 4 spec stocks with 50 shares each at $2 a share. with my broker, that would be $404 ($1 per trade)
My two cents: use long only w/o margin and trade away. If you have any kind of reasonable system, you're pretty safe. Of course, be sure to not invest your entire account on one issue. You don't want to be holding TEVA when Israel gets hit with something big for example or an airline stock during the next terrorist attack. Use good money mgt and know how much your system can draw down your account. Let's say, for example, your account goes down 30% after a couple of months of trading. Then go back to the drawing board. Know when you're going to stop. Since you're young, if you trash your account by 30%, you can easily make it up later. But I tend to be "balls to the wall"...
fwiw, you have to be "long only" and without margin in an IRA with stocks you can buy puts, and you can short futures, but you cannot short stocks in an ira ANYWAY you also cannot use 'margin' although you can use performance bonds - e.g. futures the only margin you can use is that you can use a margin ACCOUNT for your IRA which will give you instant settlement. you cannot buy stocks leveraged though
You can buy some of the inverse ETF's for short positions in an IRA, although you cannot short individual stocks or have margin, this is true.