Dear Dave,

I have some company stock my grandparents bought for me years ago. Would be a good idea to cash out the stock and roll it into an IRA?

Dylan

Dear Dylan,

dave-ramseyTechnically, you wouldn’t be rolling it into an IRA. You would cash it out and use the money to establish a Roth IRA. And yes, I would do that.

It was very kind of your grandparents to buy you a gift like this, but I think you can do better. You didn’t mention an amount, but let’s say you’ve got $10,000 in that company’s stock. Now, would you buy the stock if you had $10,000 sitting on the table? Most people, myself included, would say no because there’s too much risk. I wouldn’t advise having the majority of your wealth — the highest percentage of your net worth — tied up in one single company. That’s bad news.

So yes, I would sell that stock and use the money to fund a Roth IRA or multiple Roth IRAs. I invest my Roth IRA money in mutual funds that have a solid track record of outperforming the S&P 500 for 10 years or longer.

—Dave