A Teen Guide for Roth IRA

What's in it for you?

By Darryl Weng

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Generation Z has been quite active in these times, despite the pandemic. Most importantly, Gen Z have been active in the investing world. With meme stocks already in full swing and coupled with a volatile market, there are endless ways to earn money fast through investing, which is what many teens have realized. But there is only one account that a teen can use to receive zero tax deductions of his/her stock returns - the Roth IRA.

The Roth IRA is thought by many people to be the king of all accounts. Not even the affluent rich can be as untaxable as the Roth IRA. There are plenty reasons why the Roth IRA is so advantageous compared to all other accounts and retirement plans, but, as for this article, I will be discussing the top 5 ways(not necessarily in order) to maximize your success in your Roth IRA through investing.

1. Invest Now - Don't wait! Such an opportunity should not go to waste. The idea that a day trader could avoid paying taxes is erroneous. Unless he/she is trading from their Roth IRA, that is. So take advantage of every edge your Roth IRA account offers you that any other investor lacks.

2. Be Yourself - Very straightforward. There is, of course, no need to further explain what this means. Please, for the sake of "hype," do not jump with the crowd. When there is such thing called "hype," you're probably too late. After all, "hype" means extravagant publicity and, more simply, lots of exposure. If you think about it, "hype" is like a balloon - when lots of exposure becomes too much exposure, it pops, or, more specifically, it plunges. In conclusion, do not join the "hype," unless your favored stock is in the category of meme stocks.

3. Invest Constantly When the Market is Volatile - To clarify, I am not promoting the idea of day trading. I am simply suggesting that you should be active in the investment world when the market is volatile. During this time, the market delivers high-risk outcomes - either high gains or high losses. If you understand the cycles or how your favored stock performs during such a volatile market, you may be able to find a point where you can buy in at a relatively low price, leading to great potential of an inflated profit. So don't wait when the money is open!

4. Take Advantage of Time - With the stock market crash potentially arriving by 2023, along with its already delayed status(making the crash more hazardous), investors in 2023 might be quite cautious on their decisions to become shareholders of an impending market crash. However, as an investor using a Roth IRA account, you can afford to be a little reckless. You have years, probably a few decades, to figure out when you would like to sell or buy stocks. Within those years, your stock that you happen to fancy may return to normalcy, or even better - its price may be more than double the original price you bought. Therefore, market crashes should not be a factor that you should worry too much. But you may be worried if you are not following the next tip on the list.

5. Invest Low Risk-wise - Allow me to clarify what this means: investing low risk-wise means investing in stocks that you believe the ratio of the probability of losing money to earning money off of a stock, at the price you wish to buy, is very low. There are two specific reasons as to why you must follow such an investing formula. First, there is a maximum contribution to the Roth IRA per year. This means that if you lose all your money in your Roth IRA account, you are highly unlikely to resupply your Roth IRA account with money anytime soon. Second, even if you believe you have a low probability of losing money when you bought your stock, you should have a high probability of gaining money. Since the Roth IRA is untaxable, you need to take advantage of it. So avoid buying ETFs because ETFs grow quite slowly, even though it's almost never going to drop below your buying price. But, of course, that is not to say that you should invest in penny stocks with little to no reputation.