Generally speaking, it's always best to do more active trading in a tax-deferred IRA than a taxable account because you won't have to pay capital gains and losses on the investments. If you plan to do more short-term trading with money you have set aside for aggressive investments, then an IRA may be best. Conversely, a taxable account may be more appropriate for tax-efficient investments such as qualified dividend stocks or municipal bonds.
If you’re more of a buy-and-hold investor and you think these “risky” holdings
might tank, causing you to eventually sell them at a large capital loss, a taxable
account might be better. Why? Because you’ll be able to net your losses
against gains, deduct an additional $3,000 of losses per year, and then
carry forward any remaining losses to deduct in future years. You get Uncle Sam to share in the pain of your
losses with a taxable account.
On the other hand, if you’re more of a trader and anticipate frequent
shifts of holdings—either to harvest quick gains or sell quickly after small losses—then a tax-sheltered
account might be better. You don’t have to deal with reporting all the
gains/losses on your tax return.
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