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IRA distributions

Q: Do I have to sell my IRA stocks when I turn 70½?

A: With traditional IRAs, you must begin taking distributions after you turn 70½. These withdrawals generally will be taxable. You may need to sell some stocks in the IRA to generate the cash to withdraw. If you have a Roth IRA, there are no mandatory distributions.

Q: Can I claim a loss on worthless stock without selling the shares?

A: You may be able to, but you’ll have to determine if your stock qualifies as “worthless” according to IRS rules. It’s often simpler to just sell. If selling through your broker isn’t worth it, you can sell the shares to a friend for pennies. But not to a spouse, siblings, parents, grandparents or lineal descendants.

My dumbest investment

Dear Fool: I bought and continued to buy E-Trade on its way down in 2008.

I’d heard good things about it from a TV stock guru, and I also knew of a respected hedge-fund manager who was buying shares as they fell.

I fooled myself into thinking that these experts knew better than I did.

I ultimately learned not to buy a stock that’s on fire assuming it probably can’t get much worse. Wait for the fire to be put out and see if there is anything worth salvaging in the ashes.

With E-Trade, I didn’t appreciate how big its banking and mortgage business had become, so much so that there was talk of bankruptcy during the credit crisis.

The Fool responds: It’s critical to understand that a falling stock can fall further, even if it seems really cheap.

Remember that stocks often fall for valid reasons, some of which are short-term issues and others long-term or permanent problems. If you maintain confidence in a company, waiting out a downturn can be smart. In recent years, E-Trade has still been struggling.

Shares of Oracle (Nasdaq: ORCL), the world’s No. 3 software company, had recently been trading near its 52-week high.

But after posting its third-quarter earnings report, which missed Wall Street expectations slightly, its shares took a hit of close to 10 percent. The company blamed its aggressive sales-force expansion.

Still, the report featured stronger profit margins and record free cash flow.

Revenue from software licenses and subscriptions division fell a bit, but only due to a strong dollar.

Licenses and subscriptions are of great interest, as they promise high margins and recurring revenue.

Oracle’s solid long-term track record is largely thanks to founder and CEO Larry Ellison, who aims to be either No. 1 or No. 2 in a given market.

If the company can’t achieve that, it’ll either exit the market altogether or leverage its strong balance sheet to acquire a company that will help it get to a market-leading position.

Oracle’s acquisition of Acme Packet, for example, helps it offer clients secure network sessions supporting multiple applications.

Acme Packet’s product portfolio also boosts Oracle’s competitive position against enterprise rival Cisco.

The stock seems attractively priced, with a recent P/E ratio of 15 and a forward P/E, based on projected earnings, of just 11.