Need advice on where to open Roth IRA

[sethmachine]

Hi,

I am planning on opening and funding a Roth IRA for the full amount for last year (2016) at $5,500.

I wish to choose an account that has the least fees / expense ratio.

What would be a good company/account manager to sign up for?

Can I get an account where some of the amount I get to allocate on my own and the rest the account manager decides to allocate?

[Nutria]

I am planning on opening and funding a Roth IRA for the full amount for last year (2016) at $5,500.

Do you have the $5,500 cash ready to invest, or will you be dribbling it in over the course of the next 20 weeks?

I wish to choose an account that has the least fees / expense ratio.

Vanguard is the "low cost leader". It has minimum initial balance requirements of $3,000. That's good if you want to drop all the money into a single "targeted retirement" fund. Not so good if you want to invest in multiple funds.

Of course, those targeted retirement funds are "funds of funds", so you actually are investing in multiple funds...

What would be a good company/account manager to sign up for?

Vanguard, Fidelity and Schwab are good and I use them. There are others, too, that I don't have experience with.

With Fidelity and Schwab, make sure to buy their "no transaction fee" ETFs. Otherwise, you get nibbled to death by transaction fees.

Can I get an account where some of the amount I get to allocate on my own and the rest the account manager decides to allocate?

I chose Fidelity for my Roth IRA because my company's 401(k) is with them, and I like not having to bounce around to lots of web sites.

Schwab is good, too.

None of us recommend full service (read: expensive) brokers like Edward Jones.

[kork13]

Vanguard. Search complete.

You're crossing your wires, however. If you want an asset manager, you'll pay significant fees for the privilege. If you want low costs, go with a self-managed index mutual fund portfolio.

As stated, Vanguard has some of the industry's lowest-cost mutual funds, and they're a great company. I started elsewhere, and happily switched to Vanguard & never looked back. Target date funds are good as a starter mutual fund, which can act as a managed fund with none of the expense. Once you build up your balance, you can branch out into a few core funds, like VTSAX, VTIAX, & VBTLX.

Best advice? Keep it simple, keep it cheap. You can be very successful with just 2, 3, or 4 broad market index mutual funds. And as you've already touched on, you want to minimize your investment costs as much as possible. Every dollar spent in expenses is $5 out of your nest egg at retirement.

[disneysteve]

I also agree with going with Vanguard and using index funds to keep it simple and low cost. Forget about paying a manager. Understand that managers fail to beat the indexes almost always, especially over the long term, and that sub-par performance comes with higher expenses.

[feh]

Hi,

I am planning on opening and funding a Roth IRA for the full amount for last year (2016) at $5,500.

I wish to choose an account that has the least fees / expense ratio.

What would be a good company/account manager to sign up for?

Can I get an account where some of the amount I get to allocate on my own and the rest the account manager decides to allocate?

Vanguard or Fidelity would be fine. And forget about having somebody else manage it; you can and should do it yourself.

https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investing_start-up_kit

[GoodSteward]

It really is easy to set it up even though it can be intimidating. The more difficult part can be picking the funds. You don't want to keep swapping over time, so make sure you get the right ones up front if possible.

[snafu]

Yet another voice for Vanguard and of course the participants at SA are delighted to recommend specific funds as your holdings grow over time. You can set up DCA which automatically transfers money to your holdings if you think 2017 will be a bumpy ride. It's not written in stone and you can make changes as you become comfortable with ROTH IRA

[MakeAStash]

None are perfect but Vanguard and Fidelity seem to get the most positive mentions while on the flip side eTrade and T Rowe Price receive many negatives.

[dczech09]

I personally use T Rowe Price for my investing, and am actually very happy. Not sure why they are getting negative mentions...

At any rate, I would avoid a financial advisor or money manager right now. Most will not work with small/start-up investors, and even the ones who will - you will find the fees to be pretty outrageous in proportion to your investment. Once you have built up some adequate assets and have yourself more established would it be advisable to seek the services of a qualified financial professional.

Stick with Vangaurd, Fidelity, T Rowe Price, or some other reputable provider (those three mentioned are the big dogs in the industry). You can set up an IRA very easily (just as easy as setting up a bank account), and you can set up automatic investments.

[kv968]

I personally use T Rowe Price for my investing, and am actually very happy. Not sure why they are getting negative mentions...

I don't get why T Rowe would get negative mentions either. I have my Roth with them and just to compare "apples to apples" their target date funds have outperformed Vanguard's by 20-50 basis points over the past 10 years and around 100 basis points better than Fidelity's. It could be said that the difference is attributed to them having a higher equity allocation than the others (which is typically true), however when using risk-adjusted measurements such as the Sharpe or Sortino Ratios they are equal or if not better that the others.

Not knocking Vanguard nor Fidelity because I have investments with both as well and am quite pleased with them, but T Rowe should also be a major consideration when choosing a fund company.

[corn18]

Expenses.

TRP 2050 fund - 0.76%
Vanguard 2050 - 0.16%

TRP 2050 would need to do 50 bpp better than VG just to be even with VG.

[kv968]

Expenses.

TRP 2050 fund - 0.76%
Vanguard 2050 - 0.16%

TRP 2050 would need to do 50 bpp better than VG just to be even with VG.

And that's what my point is...it DOES do 50 basis points better and then some...

10 Yr. Avg
TRP 2050 - 5.65%
Van 2050 - 5.27%

Again, I have nothing at all against Vanguard and do a lot of investing in their offerings. However you can't let expense drive ALL of your investing decisions and just blindly assume cheaper is ALWAYS better.

[corn18]

And that's what my point is...it DOES do 50 basis points better and then some...

10 Yr. Avg
TRP 2050 - 5.65%
Van 2050 - 5.27%

Again, I have nothing at all against Vanguard and do a lot of investing in their offerings. However you can't let expense drive ALL of your investing decisions and just blindly assume cheaper is ALWAYS better.

This data would indicate that Vanguard 2050 is returning 0.22% more than TRP 2050 after expenses. Unless I am doing the math wrong.

TRP 2050 5.65% - 0.76% = 4.89% ROI
Van 2050 5.27% - 0.16% = 5.11% ROI

5.11% - 4.89% = 0.22% better for VG

[disneysteve]

This data would indicate that Vanguard 2050 is returning 0.22% more than TRP 2050 after expenses. Unless I am doing the math wrong.

TRP 2050 5.65% - 0.76% = 4.89% ROI
Van 2050 5.27% - 0.16% = 5.11% ROI

5.11% - 4.89% = 0.22% better for VG

That's not right, Tom. Stated fund returns are net after expenses.

[corn18]

That's not right, Tom. Stated fund returns are net after expenses.

Learn something new every day. Thanks!