Roth IRA suggestion please

[PauletteGoddard]

Someone I'm very close to (who isn't me, I already have a Roth IRA) is expecting to receive close to $2000. He's disclosed he wants to put the money in his Roth IRA, which he opened over two years ago but hasn't contributed to since.

He's intimated he'll be asking me for advice on how to invest it. I want to tell him to keep it as stupid as possible and just plunk $3000 in Vanguard's Total Stock Market Index.

This is not a person who keeps up with investing trends -- he's mr. invest it and forget it, so a diversified index fund investment seems appropriate. However, I'm not Ms. CFP, so I'm wondering: is there anything lazier and just as effective as VTSMX as a first investment for my Slacker Boy's Roth IRA?

PG

[Ima saver]

Re: Roth IRA suggestion please

I think your advice is very good!!

[sweeps]

Re: Roth IRA suggestion please

If you want lazy but even more diversified, check out one of the target retirement funds. For example, VTTHX. This would give your friend exposure to bonds and foreign stocks in addition to U.S. stocks.

[disneysteve]

Re: Roth IRA suggestion please

I agree with Sweeps. The targeted retirement funds are a good no-brainer way to go. But it does depend on the person's age and what other investments (if any) he already has. And one thing to consider is how aggressive he wants to be. There is no law saying you have to pick an accurate retirement age. If you would likely retire in 2035, you could pick the 2045 fund and get a more aggressive (i.e. more stock) portfolio.

[lrjohnson]

Re: Roth IRA suggestion please

I just opened a ROTH IRA. At $3K, will add $1k next month. That sounds so simple, and it kinda was (online, Vanguard) but whew, when it looks like a hurdle, it feels spectacular to get it done.

[sweeps]

Re: Roth IRA suggestion please

Way to go, LRJ.

[Ima saver]

Re: Roth IRA suggestion please

Irjohnson, you have been talking about this for a while. Good for you!! I know I reseearched my first mutual fund for about 6 months before I opened it. Which fund did you chose? Congratulations!!

[lrjohnson]

Re: Roth IRA suggestion please

Just set up my Yodlee too...I'm smoking now, out of control!

[Ima saver]

Re: Roth IRA suggestion please

Don't know what a yodlee is, you are ahead of me!![Automated by GetSmile]

[Diolla]

Re: Roth IRA suggestion please

I agree with Sweeps. The targeted retirement funds are a good no-brainer way to go. But it does depend on the person's age and what other investments (if any) he already has. And one thing to consider is how aggressive he wants to be. There is no law saying you have to pick an accurate retirement age. If you would likely retire in 2035, you could pick the 2045 fund and get a more aggressive (i.e. more stock) portfolio.

A recent article I read said the target retirement funds aren't doing a good job of living up to their promise. Even the ones that are suppose to be agressive are playing it too safe. If I had to choose I would go with the total stock or an index fund. Prolly do just as good if not better in the long run.

[sweeps]

Re: Roth IRA suggestion please

Did you read that article on Yahoo? It was referring specifically to the conservative retirement funds. The 2035 fund, for example, is 90% invested in stocks -- I wouldn't call that conservative.

[Diolla]

Re: Roth IRA suggestion please

90% stock sounds agressive until you look at what kind of stocks. Little or no small cap or foreign stocks. I will look and see if I can find the article, it wasn't Yahoo it was from a newsletter I get and I usually delete it (hence the link) once I read it.

[Diolla]

Re: Roth IRA suggestion please

http://www.marketwatch.com/News/Story/Story.aspx?guid={65F7B3CD-5F59-4936-924A-34BE12C209E7}&siteid=mktw&dist=

Here it is,

[rerod]

Re: Roth IRA suggestion please

Interesting.
Im surprised no one commented on this article. And now I dont feel as indecisive knowing others have taken a long time making this decision.

If I pick the 2045 with vanguard. Can I easily reallocate to another fund after Im more educated? Im not the mr. invest it and forget it type. I feel guilty I havent educated myself better years ago. But am determined to.

[disneysteve]

Re: Roth IRA suggestion please

If I pick the 2045 with vanguard. Can I easily reallocate to another fund after Im more educated?

It is very simple to move money amongst different funds with Vanguard. You can do it all online when you access your account.