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Supercharge Your IRA With These Stocks

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If you want to have a comfortable retirement, you have to make the best investments you possibly can. With a little effort, you can find plenty of good candidates for stocks that will help you build the wealth you need to retire rich.

One great place to invest is in a tax-deferred retirement account like an IRA. With an IRA, you have a lot of things going for you. You don't have to worry about paying taxes on capital gains or dividends throughout your career; the only thing that matters from a tax standpoint is how much money you have when you start making withdrawals after you retire. And in a Roth IRA, you never need to worry about taxes.

So the ideal strategy for an IRA is to find great performers and milk them for everything they're worth. Finding good prospects for such stocks isn't a hard task, but you need to remember a few important things.

Look forward
Many investors look in the wrong place when they try to find winning stocks, and it's not entirely their fault. Much of the time, you'll find advice that looks backward, pointing to great stocks like Dell (Nasdaq: DELL  ) and Microsoft (Nasdaq: MSFT  ) that turned longtime shareholders into millionaires.

Unfortunately, anyone who buys Dell or Microsoft today is almost guaranteed not to enjoy the same returns that shareholders who bought in 20 years ago got. That's because both businesses have matured, and the entire tech industry has changed. Dell has seen its reputation change from that of an innovative hardware manufacturer to a commodity computer maker, aiming squarely at the low-end market where margins are weakest. Microsoft continues to dominate the operating system and business applications markets, but having to offer its products free in response to challenges from up-and-coming cloud-computing competitors could threaten its profits down the road.

No, you need to look at tomorrow's high-growth companies for that kind of long-term growth. Here are a couple of ideas:

Amazon.com (Nasdaq: AMZN  )
At first glance, you might think that I'm guilty of looking backward with this pick. Sure, Amazon shares have risen at a 20% annual clip since 1998.

The key, though, is that just like Microsoft and Dell were earlier in their existence, Amazon is just getting started. Skeptics may point to Apple's iPad as a Kindle killer, but the fact is that Apple isn't challenging Amazon in its general retailing market. More importantly, its Marketplace has expanded to cover just about everything you could possibly want, and has done so in a way that has left eBay (Nasdaq: EBAY  ) in the dust.

Analysts believe the company could grow earnings at a better-than-25% clip for the next five years, and this time they may have it right.

Clean Energy Fuels (Nasdaq: CLNE  )
With the oil spill in the Gulf, crafting a coherent, sustainable energy policy is more important than ever. That's why a company that helps provide drivers with clean-burning natural gas has a bright future right now.

Of course, switching drivers from gasoline to natural gas isn't a sure thing by any means. Fuel Systems Solutions, which helps provide parts to convert cars to use natural gas, is one of the most heavily shorted stocks at the moment, in part because many expect legislation that would mandate cleaner-burning fuels to fail.

But if oil prices continue to climb, natural gas could look cheap for a while. Devon Energy (NYSE: DVN  ) and Chesapeake Energy (NYSE: CHK  ) are sitting on gluts of natural gas at the moment, and even with oil prices having regained a good chunk of their losses after the 2008 oil bust, natural gas is still lagging. That could make it a good way to play the future of the U.S. energy industry.

Taking a shot
Those are just a couple of ideas of potential moneymakers for your retirement account. With high-risk stocks like these, you always want to make sure you're well-diversified in order to avoid catastrophic losses if one of your stocks goes sour. But as a way to boost your retirement savings, especially for those with long time horizons, hitting for the fences is a good way to get started on the path to a secure retirement.

In a tough market, you have to stretch your comfort zone to make profits. Fellow Fool Nate Weisshaar explains how many investors have wasted the past 10 years of their lives.

Fool contributor Dan Caplinger has never met a turbocharger he didn't like. He owns shares of Chesapeake Energy. Chesapeake Energy and Microsoft are Motley Fool Inside Value selections. Apple, Amazon.com, and eBay are Motley Fool Stock Advisor recommendations. Motley Fool Options has recommended a bull call spread position on eBay and a diagonal call position on Microsoft. The Fool owns shares of Chesapeake Energy and Devon Energy. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy has a Prius in one parking spot and a Camaro in the other.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 06, 2010, at 9:45 PM, scanlin wrote:

    Most brokers allow covered calls in IRA accounts, which is a good way to get some extra monthly income into your IRA. If you have a self-directed IRA with stocks or ETFs in it then you should be writing calls each month. If you're not then you're leaving money on the table. Conservatively, by writing out of the money calls you should get at least 0.5%/month; that's an extra 6%/year you could make from investments you already own.

    MikeS

    http://www.borntosell.com

    covered call investment tools

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Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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10/30/2014 12:32 PM
AMZN $297.96 Up +3.84 +1.31%
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