Help with Roth IRA Investing!

[Bades]

I currently have $900 in an E*TRADE Roth IRA account.

I haven't allocated it to anything just yet, as the numerous choices are a bit overwhelming for someone who isn't as knowledgeable as they probably should be

I'm looking for this to be a long term retirement account. Probably want some sort of target date fund? On a risk scale of 1-10, probably a 7-8 as I am young (25). Sound right? Obviously would like to limit the amount of fees associated with picking an investment too.

If $900 is to low to avoid any sort of minimums, I can put more in if $1000 is the min.

Any suggestions, advice?

Thanks!

[disneysteve]

I currently have $900 in an E*TRADE Roth IRA account.

I haven't allocated it to anything just yet, as the numerous choices are a bit overwhelming for someone who isn't as knowledgeable as they probably should be

I'm looking for this to be a long term retirement account. Probably want some sort of target date fund? On a risk scale of 1-10, probably a 7-8 as I am young (25). Sound right? Obviously would like to limit the amount of fees associated with picking an investment too.

If $900 is to low to avoid any sort of minimums, I can put more in if $1000 is the min.

Any suggestions, advice?

Thanks!

I think a good way to go, particularly with a relatively small amount of money, is an exchange-traded fund (ETF). Those are like mutual funds but trade like stocks, so they have no minimums. You can buy 1 share or 1,000 shares. Some ETFs do have commissions but there are others that do not. Look into what E-trade offers in the way of commission-free ETFs and use that list to narrow your options.

Do you have any other investments? If so, it is important to always look at the big picture as far as asset allocation is concerned. Don't look at your Roth by itself if it is part of a larger portfolio.

[Petunia 100]

I currently have $900 in an E*TRADE Roth IRA account.

I haven't allocated it to anything just yet, as the numerous choices are a bit overwhelming for someone who isn't as knowledgeable as they probably should be

I'm looking for this to be a long term retirement account. Probably want some sort of target date fund? On a risk scale of 1-10, probably a 7-8 as I am young (25). Sound right? Obviously would like to limit the amount of fees associated with picking an investment too.

If $900 is to low to avoid any sort of minimums, I can put more in if $1000 is the min.

Any suggestions, advice?

Thanks!

If you want to stick with ETFs, you'll need to build your own portfolio. You can easily do this, but if you're paying commssions on each transaction, the cost will be prohibitive. If you are not paying commissions, then choose a total stock market etf, total international stock market etf, and a total bond market etf.

If you want to buy a target retirement fund, those at Vanguard are excellent. If you buy them through anyone but Vanguard, I think you will find you will be dinged with a transaction fee on each purchase (Vanguard refuses to charge 12b-1 fees to shareholders). To avoid paying transaction fees, open your account directly with Vanguard. 1k is the minimum.

Good luck and happy investing.

[Bades]

My Big Picture:
5k in in about 5 different stocks (these are more short term 3-5years)
3-4k in my 401k which is through my employer's own Target Date Fund. (long term)
$700 in my ESPP (Employee Stock Purchase Program) (long term)
$900 (will put in another $900 before end of year) in ROTH IRA with no allocation at moment. (long term)

For my Roth IRA I want something that is diverse, a bit risky, low maintenance, and is long term.

[Bayspieler]

My Big Picture:
5k in in about 5 different stocks (these are more short term 3-5years)
3-4k in my 401k which is through my employer's own Target Date Fund. (long term)
$700 in my ESPP (Employee Stock Purchase Program) (long term)
$900 (will put in another $900 before end of year) in ROTH IRA with no allocation at moment. (long term)

For my Roth IRA I want something that is diverse, a bit risky, low maintenance, and is long term.

If it's in an E*Trade account, you might consider buying SPDR. It tracks the S&P500, but trades like a stock. Google 'SPY'

If E*Trade works like it used to when I was using it, you pay a flat fee for each transaction, so you save money on your 'load' buy buying larger sets of stocks.

[thesimplemoneyblog]

At this dollar amount, you might actually be better served investing in an 'index mutual fund' instead of an ETF. Index mutual funds behave similarly to an ETF, but you typically do not have any transaction costs. Especially if you are investing now and you plan to invest more money in small amounts gradually over time, you will be better served with having no transaction costs, but a slightly higher annual fund expense ratio until you build up your Roth to a larger amount. Most index mutual funds have very low expense ratios too, and they can be pretty comparable to an ETF's fees (though usually slightly higher).

[disneysteve]

At this dollar amount, you might actually be better served investing in an 'index mutual fund' instead of an ETF.

The reasons I recommended an ETF over a fund was because of the low dollar amount. There is no minimum for purchasing shares of an ETF but mutual funds have minimums that often exceed what the OP has to work with.

There are actually a lot of companies that sell ETFs now with no commission so as long as you stick to those, investing in ETFs is free.

[kv968]

There are actually a lot of companies that sell ETFs now with no commission so as long as you stick to those, investing in ETFs is free.

Etrade does offer some no commission ETFs:

No commission ETF's

A possible problem with them is that most, if not all, of them have relatively low volume and market caps.

[thesimplemoneyblog]

A possible problem with them is that most, if not all, of them have relatively low volume and market caps.

Yeah, that's why I think it would be worth assessing the index mutual funds in the OPs search too. Many have low minimums (especially since it is a retirement account, then it would have lower minimums than a regular brokerage account). Plus, for a beginning investor, dealing with the supply/demand impact (most likley unknowingly) of a thinly traded ETF and potential deviations from intrinsic value (often a far more significant cost than commissions and transaction fees), it just seemed like it could be more cost effective in an index mutual fund since they trade at NAV, have similar low fees, and often quite low minimums.

Of course, for the broad market exposure to an S&P 500 ETF or total stock market index, this supply/demand concern isn't as likely to be much of a concern since they are the most actively traded, but when the OP starts diversifying more, it could be a serious cost that could add up.