Is this how a Roth IRA work? Seems to be confusing?

I currently have 2000 dollars in my Roth IRA on M1 finance but I wanted to buy some stocks. It keeps asking me to use the 2000 dollars (that’s in my Roth IRA) to buy the stocks. But if I do that, then that means the money will leave my Roth IRA, no? Is that how it work?

Essentially, are you able to use the money inside the Roth IRA to buy stocks instead of just let it sit there? (Is that what you’re supposed to do?)

Like... I max out my Roth IRA with 6000 for the year of 2020 and use all 6000 to buy index funds. Is my Roth IRA still maxes out for the year 2020 or since I bought the index funds for all 6000 I need to max it out again? 

3 Answers

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  • kswck2
    Lv 7
    1 month ago

    Oy. Why open a ROTH if you don't know how it works? 

  • Eva
    Lv 7
    1 month ago

    The money would be replaced by the stock. If you want to buy stock and hold it in an open trading account, you will have to open a personal trading account and deposit money into it.

  • 1 month ago

    If it gives you the option to buy stocks then it is using the stocks to generate the growth for your account. It is still a Roth IRA. Your index funds are a just managed group of mixed stocks or bonds. By taking the option to buy individual stocks, you will be managing the risk on your own.

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