Traditional asset
Stocks & ETFs
Publicly traded equities and exchange-traded funds — the core of most retirement portfolios.
What it is
Stocks and ETFs are publicly traded securities bought and sold on public exchanges. They offer daily liquidity, transparent pricing, and broad diversification, which is why they anchor most retirement accounts.
Holding it in a self-directed IRA
The securities are held in your IRA’s custody account and traded through its brokerage capability. Dividends, interest, and sale proceeds settle back into the IRA, where they compound tax-deferred in a Traditional IRA or tax-free in a Roth — there is no capital-gains tax on trades made inside the account.
Requirements
- The securities are titled in the IRA’s name and traded through the account.
- All purchases are funded from IRA cash, and all proceeds return to the IRA.
- Contributions are made in cash, within the annual limit, or by rollover — you cannot move stock you already own personally into the IRA.
Limitations and prohibitions
- Margin borrowing is generally not permitted — a margin loan is a prohibited extension of credit and can create unrelated debt-financed income; accounts use cash, or limited margin only where the custodian and IRS rules allow.
- Short selling and certain options strategies may be restricted by the custodian.
- Tax-loss harvesting does not apply inside an IRA, and wash-sale rules can reach across your taxable accounts.
- Concentrated positions carry ordinary market risk; nothing here is a recommendation.
Valuation and liquidity
Stocks and ETFs are marked to market at the exchange close and are among the most liquid holdings an account can carry, typically settling in one to two business days.
Tax considerations
Because gains and dividends are sheltered inside the IRA, tax-inefficient or high-turnover strategies are often better placed in a tax-advantaged account than a taxable one — but the trade-off is that losses cannot be harvested.
A worked example
You direct your IRA to buy 100 shares of a broad-market ETF at $95 ($9,500) from the account’s cash. Six months later it trades at $110 and you sell for $11,000. The $1,500 gain stays in the IRA with no capital-gains tax due; in a Roth, it is never taxed at all if you meet the qualified-distribution rules.
IRS forms & records
- Form 5498 — reports contributions and the account’s year-end fair-market value.
- Form 1099-R — reports distributions when you take money out.
- No Form 1099-B for trades inside the IRA — buys and sells within the account aren’t separately taxed to you.
Common mistakes that can cost you
- Trying to move stock you already own personally into the IRA — contributions must be cash (within the limit) or a rollover.
- Using margin: an IRA generally can’t pledge its assets or borrow on margin, and margin gains can create UBTI.
- Expecting to harvest tax losses — losses inside an IRA are not deductible.
Before you invest
- Cash is available in the account to settle the purchase.
- The position is titled in the IRA’s name.
- You understand margin and short-selling limits.
- You know the 2026 contribution limit: $7,500, or $8,600 if age 50+.
Authorities
Educational only. This page is general information, not individualized investment, legal, or tax advice. Rules depend on your account type, transaction, tax year, and circumstances — consult a qualified professional.