Just opened Roth IRA - Which funds?

[Bades]

Okay so I opened a Roth IRA today, part in due to take a Savings Credit for 2011, and it's a good idea for retirement anyway.

I have a 401k with my employer where they will be matching dollar for dollar up to 5% come this summer. For now I've been putting 5% in anyway (have like $1700). Started job Aug 2011, 24 years old. No debt at all.

Placed $900 into the Roth account today. I'm trying to decide how to fund it. I'm not real savvy on investing. My 401k is 80% Target Fund 2050, and 20% Company Stock. I also am involved in an Employee Stock Program - Contributing $100 a month. Reason why I am also buying the stock in my 401k is because the ESP purchases quarterly, and I want to take advantage of the low stock price now.

Back to Roth - I don't mind being aggressive. But I have really no clue where to start. Should I just go with another Target Date Fund? I want something I can contribute to annually (maybe semi-annually) and not really worry about it much. But I'm also young, so I want to be aggressive.

Any ideas? Thanks!

[disneysteve]

My 401k is 80% Target Fund 2050, and 20% Company Stock. I also am involved in an Employee Stock Program - Contributing $100 a month.

First, I would reconsider the company stock. Rule of thumb is not to have more than 10% of your portfolio in any one company and probably should be even less than that when that company is also your employer. 20% plus the ESP is way too much to have tied up in one company.

As for investing the Roth, you could do another Target fund if you want simple and wide diversification. If you want to be more aggressive, you could go with a straight stock allocation, maybe boost your international exposure. It really depends on how you want to play it. You need to determine your asset allocation plan and then follow that.

[bjl584]

You could do a target fund (even though I don't like them) or you could do a blend of large and small cap funds.

What is your risk tolerance? Do you know anything about stocks? If not, you will want to stay away from individual companies.

Find a fund with low expense ratio that has a good 10 year history of positive performance. There are thousands of them. You just need to do some searching around.

[Bades]

20% plus the ESP is way too much to have tied up in one company.

Yeah I'm just doing this temporarly as the stock is fairly low and my confidence in the company is high. Probably only planning on this allocation no longer than end of year.

As for investing the Roth, you could do another Target fund if you want simple and wide diversification. If you want to be more aggressive, you could go with a straight stock allocation, maybe boost your international exposure. It really depends on how you want to play it. You need to determine your asset allocation plan and then follow that.

Are some target funds more aggressive than others? I'm not confidence in picking a straight stock allocation at the moment. However E*trade has a lot of tools to figure this all out, just need to take the time and try to understand.

[Bades]

What is your risk tolerance?

I would like to be fairly risky (8/10) with my Roth IRA. I'm seeing this as secondary retirement option aside from the 401k match I get. So considering there wont be a lot of money intially, and the money that will go into this will be from extra money I save through out the year, I can afford to be risky.

[Bades]

Do you know anything about stocks

Hard to say - I invested 3k into mutual funds when I was about 20 through my dad's broker, and that was my first expereince with investing. Since then I've bought a few stocks that I've tinkered with on my own over the last few years (about 2k worth). But I've never really done any sort of indepth research besides looking at price history charts, Ratings, and gut feelings to be honest.

[kv968]

Since you don't have much money in the Roth at this time and you don't really want to be bothered with it, I'd suggest that you just put in a target date fund at least for now. Some target date funds are more aggressive than others. Which company do you have your Roth with?

Placed $900 into the Roth account today. I'm trying to decide how to fund it. I'm not real savvy on investing. My 401k is 80% Target Fund 2050, and 20% Company Stock. I also am involved in an Employee Stock Program - Contributing $100 a month. Reason why I am also buying the stock in my 401k is because the ESP purchases quarterly, and I want to take advantage of the low stock price now.

And as Steve said, that is too much to have in your company stock. A question I have for you is why is the stock price low? Or better yet, why do YOU think the stock price is low?

[disneysteve]

Are some target funds more aggressive than others?

Target funds with the same date will have somewhat different allocations from one company to another.

Target funds with different dates may have identical allocations within one company but the timing for when they adjust those allocations varies.

So Vanguard's 2050 fund and Fidelity's 2050 fund may be different from each other.
Vanguard's 2050 fund and their 2045 fund may currently be identical but as those dates get closer, the 2045 fund will get more conservative earlier than will the 2050 fund.

[Bades]

Since you don't have much money in the Roth at this time and you don't really want to be bothered with it, I'd suggest that you just put in a target date fund at least for now. Some target date funds are more aggressive than others. Which company do you have your Roth with?

And as Steve said, that is too much to have in your company stock. A question I have for you is why is the stock price low? Or better yet, why do YOU think the stock price is low?

It's with E*Trade.

Historically the stock price is fairly low. The company is one of the biggest financial companies to come out of the debt crisis fairly strong, I just think it is a good idea temporarily. By the time I re-balance it, it will only be maybe a couple thousand in the stocks. Not a big deal in regards to the larger picture.

[kv968]

It's with E*Trade.

What is the expense ratio on their target date funds and what company do they use for them (i.e T Rowe Price, American Century, etc...). The reason I'm asking is because it looks like the NTF funds they offer have slighty higher than normal expense ratios. The T Rowe Price funds offered aren't that bad but there aren't many of them.

Historically the stock price is fairly low. The company is one of the biggest financial companies to come out of the debt crisis fairly strong, I just think it is a good idea temporarily. By the time I re-balance it, it will only be maybe a couple thousand in the stocks. Not a big deal in regards to the larger picture.

Wells Fargo perhaps?

[Bades]

Nope, think more of...the most outspoken CEO.