IRA Rules And Penny Stocks

Stock market investing can be pretty complicated and if you factor in taxes and different tax vehicles, it can cause you to ask questions like are IRA rules and penny stocks different from anything else. It's easy to get confused. But don't confuse a penny stock investment with an account type. An IRA is nothing more than an account type set up by the government to give us a tax break. You can fund an IRA with stocks, including penny stocks. The difference in investing in penny stocks in your IRA and an individual brokerage account is the tax treatment of you gains and losses.

All money in a brokerage account is subject to taxes while the gains in an IRA are tax deferred. It also means you can't claim stock market losses either. Because of an IRA's tax favored status, there are limits to how much money you can contribute and rules on when you have to start withdrawing the money. There are no such rules for a regular brokerage account.

Stocks in general make a good investment for an IRA because they are long term in nature. It makes sense to put long term investments in a long term type of account. The real question here is should you invest in penny stocks. I would urge you to consider only buying stocks that are over $15 per share and to shy away from penny stocks. They are speculative and you risk losing money in the stock market no matter which stock you choose but more so with penny stocks whether you use an IRA or not to buy them in.