Here for my parents...

[dorkiedoode]

Hey guys, I'm only 18 so I don't know as much as i would like to about tax/investing to go on doing it myself so i need help(but i do park my money in fidelity FSXLL Money market!!). My dad is 63 and my mom is 53 and they don't know anything about investing. they only invest in the market so they could avoid paying taxes on april(i think if you invest you get deductions or something). they had to contribute 2,000 last year to their Trad IRA and the broker invested their money in farmer's insurance( i don't know the full story). my dad found out his stocks is only worth 1,888 now and was afraid that he might lose more. i guess they are very low risk tolerance and would like to invest in something more stable. i told them that they should open an account with an online broker and invest the money themselves. I was thinking about putting money in an Vanguard mutual fund retirement account target 2010-2015 or just investing it in bonds/cds/mm only. do you guys think that is a good idea? will they still get deduction if they open an trad-ira online and do it themselves?

oh and also i do know a little bit about ROTH IRA and i'm pretty sure most of you would prefer that over T-IRA but i guess they want the income deduction thingy.

and you might need this.. Household Income: 98,000

[jIM_Ohio]

Roth vs traditional is a tax decision first and investing decision second. If your parents taxable income is above $66100, a deductable traditional IRA is better than a Roth for most people.

Most people in USA earn less than $66100, which is top of 15% tax bracket. $66101 is taxed at 25%, so saving that money before taxes is a good decision.

I would suggest your parents look at conservative mutual funds.

Vanguard Wellesley, T Rowe Price Spectrum Income and Permanent Portfolio would be 3 moderate funds which are less invested in the market and generally considered conservative.

Wellesly is 40% stocks and 60% bonds
Spectrum Income is 15% stocks and 85% bonds
Permanent portfolio is between 16 and 35% stocks, and also owns commodities (gold and silver)

The ratio of stocks to bonds will generally determine risk. Adding commodites will reduce the overall risk profile, but it can also add other risks (for example owning gold is a good thing at times, but not for the last 2 months). Do not make investing decisions based on what happened last month or last year- they need a bigger picture view.

[disneysteve]

To expand on Jim's comments, if your parents choose to invest with Vanguard or T. Rowe Price, they should not open an online brokerage account. They should open an account directly with the fund company at vanguard.com or troweprice.com.

They will get the IRA deduction whether they do it themselves or pay a broker to do it for them. There is no reason at all to pay a broker. That is just money out the window.

The fact that their $2,000 investment has dropped to $1,888 really isn't a big deal. That is a 5.6% loss. Trust me. Lots of us have seen far bigger losses in our portfolios in the past year as the market has tumbled. That alone doesn't necessarily mean their broker did anything wrong. But if a 5% drop is more than your folks can handle, then I agree that they need to reconsider where they keep their money.

[maat55]

I'm shocked everytime I check my balances, but I know its just part of the rollercoaster. I'm glad I have more than twenty years to go.

[dorkiedoode]

The fact that their $2,000 investment has dropped to $1,888 really isn't a big deal. That is a 5.6% loss. Trust me. Lots of us have seen far bigger losses in our portfolios in the past year as the market has tumbled. That alone doesn't necessarily mean their broker did anything wrong. But if a 5% drop is more than your folks can handle, then I agree that they need to reconsider where they keep their money.

thats exactly what i told them!! i kinda know the market a bit and it is recommended that you ride it out even if its good or bad. overall, you should see a decent return right? another reason i'm doing this is because why pay other people to do it for you when you can do it yourself!!

[atomicrc11]

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