Tweet
Okay. I'm pretty diligent about funding my Roth IRA, what I hate is figuring out where to put the money. A little background: My Roth is with E*Trade -- wouldn't be my first choice now, but I'm not really set to change it either. I have about $7000 that's unallocated sitting there making almost nothing. I've looked at a boatload of mutual funds and it seems whenever I find one that peaks my interest it's closed to new investors. Many of the other funds (including all Vanguard) have $24.50 "transaction fees" as well as first year retention fees of 1-2% (Penality if I sell before a year.) Well, since I'm looking at a $24.50 transaction fee anyway, might I be better off paying the $13.95 for an ETF? Anybody have any opinions on good ETFs? Things I should be leery about? Something I'm missing? I did a search on the boards for ETFs, but I didn't really see an ETF vs. mutual fund comparision. Oh, another problem with many mutual funds is that thay have a $3000-5000 minimum. Since I'm only working with $7000 and want lots of diversity that seems restrictive. Oh, I could also sell my other investments to fund something new, but right now there's nothing I'm dying to sell . . . What would you do?
-
-
Re: Mutual funds vs ETFs
I have been with vanguard for over 15 years and I know nothing about the $24.50 transaction fees??? I have never been charged? If you invest in an index fund or total stock market fund, you will have a lot of diversity. I got excited when I first started doing this and wound up with too many funds. Then if I sell them, I have to pay capitol gains. I would sugggest you stick with 2 or 3 funds. -
Re: Mutual funds vs ETFs
Ima, 34saving has to pay a transaction fee to buy a Vanguard fund because his IRA is not at Vanguard.
34, if most of your investing will be with one fund family, it's probably best to transfer your money to that company. If it's not, I agree, trading ETFs is usually a better choice. Just be sure to keep commissions in mind when trading. SPY is an obvious choice for an ETF. Are you looking for something in particular?Comment
-
Re: Mutual funds vs ETFs
I'm not married to one type of fund, I just know that Vanguard is a favorite around here, so I used that as my example. I currently have 5 mutual funds in my Roth and none are from the same family. Maybe Ima's right and I should just contribute more to the funds I have . . . However, as far as ETF stuff goes. Right now I have a large cap fund, a Reit fund, a small cap financials fund, a balanced fund, and an international fund. I guess I need more mid-cap exposure? I probably also should have more than 5% in international stuff, but that's all I have right now. Anybody know of any good international ETFs? (Or international mutual funds that are open to new investors?)Comment
-
Re: Mutual funds vs ETFs
iSHARES and spdrs are pretty good ETFs with okay expense ratios. Go to amex.com "The american stock exchange" where all ETFs are traded and request prospectus from all ETF companies. Then compare the expense ratio and other fees.
Also If ETFs are thing you pick switch to a lower commision broker, I use scottrade for my Rollover IRA, but again research is your best tool.Comment
-
Re: Mutual funds vs ETFs
Originally posted by 34saving
Can you elaborate on why Vanguard is a favorite "around here"Comment
-
Re: Mutual funds vs ETFs
It's just mentioned in a bunch of other threads. I think people like them because their fees are generally pretty low.Comment
-
Re: Mutual funds vs ETFs
Keep in mind that along with paying commissions on ETF transactions, you are also paying the trading spread both ways.
There is the additional problem with ETFs (which would not apply inside an IRA), of the dividends potentially not qualifying for the 15% tax rate. A lot of ETFs use a complicated creation/redemption structure to produce little or no Capital Gains distributions, but in the process they quite often do not hold the stocks inside the respective portfolios long enough to meet the requirements of a “Qualified Dividend”. Therefore, one could be liable for taxes on ordinary income as high as the 35% rate.
As was mentioned, you could avoid any costs whatsoever (other than the minor annual management expenses) if you have your IRA in the same fund family where at least one of your other more liquid accounts exists.
#Comment
-
Re: Mutual funds vs ETFs
Correct me if I'm wrong but I don't think the dividends are a concern if this is a ROTH account. In fact, dividend paying funds ands stocks are great in any type of tax-free or tax-deferred savings.
Also, what exactly is the transaction fee ? Is it a one time trade fee or is it for dividend re-investment transaction fee ? If its the former then its just a one time expense of $50-$75.
If it was me and I couldn't make up my mind, I'd pick one of the age based asset allocation funds and a S&P 500 ETF.Comment
-
Re: Mutual funds vs ETFs
If that's addressed to me, I specifically noted the 'Qualified Dividend' trap was not applicable inside an IRA. I posted "which would not apply inside an IRA".
And again, as I previously posted, the transaction fees are only part of the costs. There is also the spread, both ways, to consider, as well as the commissions.
Awfully expensive and inefficient unless one is dealing with rather large sums that will stay put for quite a while.
#Comment
-
Re: Mutual funds vs ETFs
agree with above - STAY AWAY FROM ETFs - another gimmicky trend to make lots of money for brokers.Comment
Comment