E-trade roth IRA?

[risknothing]

Im 22 years old and I would like to open a small roth IRA and E-trade has a no acct min ira. Does anyone have any experience with them?

Im thinking of opening with a beginning balance of 500. is that to little? am i wasting my time?

[kv968]

I'd suggest checking out T Rowe Price's website first. For $50/month you can join their automatic asset builder plan and invest in one of their funds that way. The thing that worries me with E-trade and the like are the commissions you may pay when buying funds.

[Scanner]

Kv is correct - you'll be assessed a fee everytime you buy or sell a trade with E-trade.

Just deal with the mutual funds directly.

If however, you would rather own stock or ETF's, then yes, e-trade, scottrade, etc. are the way to go.

[poundwise]

That is simply not true.

From the E*TRADE web site:

"No annual fees and no account minimums when you sign up for electronic statements and confirms."

"You can invest in the mutual funds... without paying loads, transaction fees, or commissions."


It is a complete myth that the only way to buy funds without paying extra fees is to hold an account directly with the fund family. While there is nothing wrong with having your account through Vanguard, T. Rowe Price, etc. there is also nothing wrong with E*TRADE, etc. where you can hold an account, buy from many different fund families (with no additional fees, etc. as mentioned above) with the option to also purchase ETFs, individual stocks, etc. etc. (if desired) all from the same account.

[kv968]

Originally Posted by poundwise

That is simply not true.

From the E*TRADE web site:

"No annual fees and no account minimums when you sign up for electronic statements and confirms."

"You can invest in the mutual funds... without paying loads, transaction fees, or commissions."


It is a complete myth that the only way to buy funds without paying extra fees is to hold an account directly with the fund family. While there is nothing wrong with having your account through Vanguard, T. Rowe Price, etc. there is also nothing wrong with E*TRADE, etc. where you can hold an account, buy from many different fund families (with no additional fees, etc. as mentioned above) with the option to also purchase ETFs, individual stocks, etc. etc. (if desired) all from the same account.

You can buy funds without extra fees, however most, if not all of the funds, that you can purchase without a transaction fee have either very high expense ratios or loads. So for the money you would save, and more, by not paying a transaction fee gets eaten up with high expense ratios. If you'd want to buy funds from Vanguard, T Rowe, etc. you then have to pay a transaction fee.

I don't necessarily think having an IRA with a brokerage firm is bad, but I think it's more beneficial to have it with a large fund family of your choice instead. You can then purchase most, if not all, of your funds through them with no transaction fee whatsoever. And if there is a particular fund you want outside of the family you choose, you could always use their brokerage to purchase them. I just think that there's enough choices in the bigger fund families to satisfy most people's needs and there's no need to use a brokerage.

[safari]

I don't know about E-Trade, but I have a Fidelity account, and I can purchase a lot of different fund families without paying a transaction fee, if I hold that fund for longer than 180 days. They offer some excellent fund choices outside of Fidelity family that I can purchase without a transaction fee and with no loads (over 1,400 funds total). Granted, those don't include Vanguard and T Rowe Price funds, but there are a lot of other highly-rated funds that I can choose from. It works out well for me because I own several Fidelity funds and a few funds from other companies, which I manage in the same Fidelity account.

[poundwise]

Originally Posted by kv968

You can buy funds without extra fees, however most, if not all of the funds, that you can purchase without a transaction fee have either very high expense ratios or loads. So for the money you would save, and more, by not paying a transaction fee gets eaten up with high expense ratios.

I'm sorry friend but this is not true. When you say "most, if not all" you are incorrect. If you hold an account with E*TRADE, TD Ameritrade, Schwab, etc. you can select from many no-load, no-fee funds including many that have low and very low expense ratios. You do make a valid point in that there are some, even many, of the no-fee funds that are either load or high expense, but that is certainly not true for "most, if not all."

Originally Posted by kv968

If you'd want to buy funds from Vanguard, T Rowe, etc. you then have to pay a transaction fee.

Now, this is true. When I searched with the E*TRADE Mutual Fund Screener, I learned that only one Vanguard Fund is a no-load, no-fee fund. All of the other Vanguard Funds are available but would incur a transaction fee. The same is true of T. Rowe Price Funds.

If one wanted to invest specifically in a Vanguard Fund then, yes, it would prove better to hold the account with Vanguard to purchase their funds. Again, the same is true for T. Rowe Price. There are certainly some viable reasons one might choose Vanguard or T. Rowe Price funds.

I must concede, as well, that Vanguard Funds, in particular, have very, very low expenses. (Which is part of why they are so popular.)

However, the lists of NTF (no-transaction fee), no-load funds available through the major brokerages are quite extensive. So, selecting funds from those is certainly a viable option as well.

As I mentioned earlier, to many, the latter is also attractive due to the ability to buy from multiple fund families, purchase shares of ETFs, individual stocks, etc. all from the same account.


Don't get me wrong, I see your point. Perhaps a happy medium would be to hold a brokerage account and an account with a fund family or two as well. Depending, of course, on how much money one was investing, how one was investing that money, and how much time and effort one wished to spend managing, or at least keeping track of, his/her investments.

Safari makes some good points about the account held through Fidelity as well.

[kv968]

Originally Posted by poundwise

I'm sorry friend but this is not true. When you say "most, if not all" you are incorrect. If you hold an account with E*TRADE, TD Ameritrade, Schwab, etc. you can select from many no-load, no-fee funds including many that have low and very low expense ratios. You do make a valid point in that there are some, even many, of the no-fee funds that are either load or high expense, but that is certainly not true for "most, if not all."

Sorry, maybe my use of "most, if not all" was a little overstated. I just went through some random choices of the NTF (No Transaction Fee) funds they had available and when I kept seeing expense ratios of 1.82%, 2.92%, etc...that lead me to believe that at least most were well above average. I'm sure there are decent ones in there but you'd just have to search for them.

Originally Posted by poundwise

Don't get me wrong, I see your point. Perhaps a happy medium would be to hold a brokerage account and an account with a fund family or two as well. Depending, of course, on how much money one was investing, how one was investing that money, and how much time and effort one wished to spend managing, or at least keeping track of, his/her investments.

Safari makes some good points about the account held through Fidelity as well.

This is basically what I was trying to say but you said it better. I think it comes down to how much time and effort someone is willing to put into it. Of course the amount of money and how it's invested comes into play when deciding brokerage vs. fund family, but I think it's more a matter of time and effort. To fully take advantage of a brokerage, one has to do some a lot of legwork on all of the funds, stocks, ETF's available and I'm willing to bet most (here I go with that "most" again), ok, SOME, of the people who open those IRA's don't want to nor have the inclination to do so. They just open the accounts there because they think that's the only way they can do so. Whereas if they knew they could open one at a big fund family, especially by using an asset builder program provided by some and didn't really need the initial minimum, they would be happier doing that. They would have quality funds to choose from and not be bombarded with over 1400+ funds they'd have to research. What I'm thinking here is simplicity is key. IMO, that is.

[poundwise]

Good points.

For many people, selecting a good, low-cost, fund family, like Vanguard, and selecting either an index fund (or more than one) or to participate in a 'target-date' fund (these have higher expenses, even at Vanguard) is probably the best way to go. That being the case, the best way to obtain those particular funds is through Vanguard itself.

If one is not tied to Vanguard (or T. Rowe, etc.) or to sub .50% expense ratios, then there are literally hundreds of funds to choose from, which have expense ratios from .50 to 1.1%. It seems that, in particular, a funds like to show a ratio of just under 1% as there are many that fit that bill.

Also, I think people should keep in mind that a low expense ratio is only one point to evaluate concerning a mutual fund. If a fund averages a return of 13% over the last 5-10 years and has an expense ratio of 1.5% then that compares very favorably with a fund that averages 10% with an expense ratio of .30%.

Of course, it should also be mentioned that some load funds are excellent performers. I'm in favor of no-load funds myself, especially for most of us individual investors, however, I don't automatically rule out a fund due to a load. A friend of mine holds several that have generated big returns for him over the course of about 10 years.

[kv968]

Originally Posted by poundwise

Of course, it should also be mentioned that some load funds are excellent performers. I'm in favor of no-load funds myself, especially for most of us individual investors, however, I don't automatically rule out a fund due to a load. A friend of mine holds several that have generated big returns for him over the course of about 10 years.

I agree. I have a couple of funds with American Funds that were gifted to me years ago and they have done quite well. I however wouldn't invest in them myself due to the 5.75% load. But the point you made is definitely valid, don't let an expense ratio or a load be the exclusive, deciding factor when choosing a fund.

[risknothing]

I opened an etrade roth ira and will be buying a mutual fund soon. there are plenty of free mutual funds to choose from.

[kv968]

Good luck and congrats on starting an IRA so young. You'll be glad you did as you get older.

[poundwise]

Absolutely. At 22 you can hardly go wrong. You show a lot of maturity and wisdom to get started now. Time is the greatest factor and each of us has a limited supply.

Best wishes!

Thanks kv968 for the civil and interesting back-and-forth discussion on the topic here.

[kv968]

Originally Posted by poundwise

Thanks kv968 for the civil and interesting back-and-forth discussion on the topic here.

No problem, and thank you too. I enjoy a good civil and interesting back-and-forth discussion myself. I'm not here to fight, just to pick up some different advice and opinions and along the way hopefully be able to give some back

[jukebox9988]

I opened my account with Fidelity because they offer no free Roth IRAs. There are enough banks that offer $0 minimums, so I wouldn't worry about $500 or so.

You can check out a full table of Roth IRA Accounts by bank on this page.

It's got 12+ on the list so far. You'd be surprised by how many banks charge ridiculous maintenance fees when the competition does exactly the opposite.

Good luck with your investing!