Recomendations for Roth IRA

**noppenbd** · 03-27-2008, 06:20 AM

If you are new to investing and want to learn, I suggest the LA Times Investor 101 website:

Money Library - Los Angeles Times

If you just want a quick and easy investment I would consider a Target Date Retirement Fund from Fidelity, Vanguard, or T Rowe Price. These are basically "funds of funds", where you can buy one investment which is actually a basket of funds, which adjusts to more and more conservative investments as you age.

**Broken Arrow** · 03-27-2008, 07:15 AM

Welcome Steve! I'm leaning towards a Roth IRA with Scottrade as well!

I would please do your research first, on what kind of investing you would like for your Roth, and THEN pick the best investment firm for the job. Of course, before that, you'll also want to clearly define what it is that you're trying to accomplish with this Roth. (Most likely, it's retirment, but that's not always the case....)

I second noppenbd's suggestion with Target Retirement Funds.

It's the easy way to to start out and start out right.

**sweeps** · 03-27-2008, 08:34 AM

I love Scottrade, but if you are new to investing, I'm not sure I would recommend such a brokerage. I would stear you to some place that offers low-cost mutual funds as nopped and BA have suggested.

I wouldn't be doing my service as a Vanguard Cultist if I didn't mention that.

Also just to confirm, do you have earned income? You can only fund an IRA with earned income.

**Steve13** · 03-27-2008, 11:42 AM

Thanks for the info, Im saving for retirement. I currently trade stocks with an account with scottrade and heve been doing quite well with the little money I have invested.
I looked into the vanguard target retirement fund, A minimum balance is 3,000. Im not sure when i can reach 3,000 to fund a retirement account soon beacuse I am saving and paying for other things on my small income: Emergencey fund, car payment, school etc.

I show taxable income but not much, < $10,000.

Any other ideas for investing with the $1,500 i have saved?

I also have a high yield savings account at 3.5% Would i be better putting my money in there for the next year or so?

**noppenbd** · 03-27-2008, 11:58 AM

Make the Roth contribution now for 2007 if you have not already filed your taxes. Once April 15th passes you will not be able to make up that contribution. Then between now and April 15th 2009 you can make your 2008 contribution. Even if you just put it in a money market inside the Roth that is better than not making your 2007 contribution. If you have already filed your 2007 taxes without indicating the Roth contribution, you can make this 1500 part of your 2008 contribution, then you still have 3500 left that you can contribute for this year.

You could check out the Vanguard STAR fund. The minimum is only $1000. It is a blend of fund similar to Target Retirement. You could also buy ETF versions of S&P 500, Total Bond Index, Total International Index funds. ETFs don't have minimums but do charge commissions.

**Broken Arrow** · 03-27-2008, 12:01 PM

Originally posted by Steve13 View Post

Any other ideas for investing with the $1,500 i have saved?

I also have a high yield savings account at 3.5% Would i be better putting my money in there for the next year or so?

Ah, I was about to ask if you had an emergency fund, and if so, if it was fully funded?

**MaksimFA** · 03-30-2008, 08:27 PM

If you are going to do a mutual fund, I would suggest a fund of funds. They are actively managed and in volatile times like this, can be good. You can even dollar cost average monthly into it. One I like for my smaller accounts is Blackrock Global Allocation fund for its long term track record of beating indexes as well as doing very well in down markets. Let me know if you have any other questions.

in full disclosure, GS, Fidelity and Oppenheimer have great fund of funds as well. Just set it and forget it.

**jIM_Ohio** · 03-31-2008, 04:20 AM

I would create an asset allocation FIRST, choose investments SECOND, then choose a brokerage THIRD.

The brokerage is a product of the first two decisions.

**Scanner** · 04-01-2008, 11:01 AM

I agree with JimOhio. . .I should keep this on notebook since I post it so much here but you can use my system, not as a template, but just to get the idea of one person's "system." Your system will be different because I'm not you and you are not me, of course.

TIER 1: $0-14,999 1 Mutual Fund/ETF
TIER 2: $15-$49,999 2 Mutual Funds/ETF's
TIER 3: $50,000- 99,999 3 Mutual Funds/ETF's
TIER 4: $100,000-499,999 4 Mutual Funds/ETF's
TIER 5: $500,000+ 5 Mutual funds/ETF's

I am nearly close from crossing from Tier 3 into Tier 4.

(If I have a gain this year, I will cross)

IMO, a Target Fund isn't necessary at amounts lower than 20K or so, unless you are talking college.

**jIM_Ohio** · 04-01-2008, 11:51 AM

Originally posted by Scanner View Post

I agree with JimOhio. . .I should keep this on notebook since I post it so much here but you can use my system, not as a template, but just to get the idea of one person's "system." Your system will be different because I'm not you and you are not me, of course.

TIER 1: $0-14,999 1 Mutual Fund/ETF
TIER 2: $15-$49,999 2 Mutual Funds/ETF's
TIER 3: $50,000- 99,999 3 Mutual Funds/ETF's
TIER 4: $100,000-499,999 4 Mutual Funds/ETF's
TIER 5: $500,000+ 5 Mutual funds/ETF's

I am nearly close from crossing from Tier 3 into Tier 4.

(If I have a gain this year, I will cross)

IMO, a Target Fund isn't necessary at amounts lower than 20K or so, unless you are talking college.

The spirit of the above is GREAT advice (add more investments as you accumulate more money). General financial planning suggests when preservation is the goal (as opposed to growth), then more assets are needed.

So use the amounts on left as a variable where 500k represents final amount of money needed. In my portfolio I would need 7-12 mutual funds to properly preserve assets.

1 Large Cap stocks
2 Mid Cap stocks
3 Small Cap Stocks
4 International Large Cap
5 International Small Cap
6 REITs
7 Domestic government bonds
8 Inflation bonds
9 Corportate bonds
10 Foreign bonds
11 emerging market bonds
12 commodities

where as when growing I would only use:
1 Large Cap stocks
2 Mid Cap stocks
3 Small Cap Stocks
4 International Large Cap
5 International Small Cap
and when I needed to get more conservative I would add two more
6 diversified bond fund
7 commodities

some people might use one fund for 1-3 (total market index) and another fund for 7-8-9 (total bond market index). I have a fund which is 6-7-8-9-10-11 and another fund which is 1-7-10-12.

My advice would be 1 fund when under 5k
2 funds under 10k
3 funds under 15k
3-5 funds under 25k (logic here is based on fund minimums and account fees).
keep 5 funds until you hit point where you want to protect some gains, then add 1-2 more.
Keep 5-7 funds until you start drawing down, then add a few more asset classes.

I have 160k now, with 5 core funds plus a 6th temporary fund (fund only exists until mortgage is paid off). I need growth to see 160k turn into $2 M.

I read an article earlier this year that draw down should be measured in 3 year increments- if you can prevent portfolio from losing value over a 3 year period when drawing down, the withdraw rate you started with can be constant with inflation adjustments and last the amount of time you predicted it would (when you started the draw down).

The issue is avoiding losses over 3 year periods. The easiest way to do that is to use a portfolio of large caps, small caps, international stocks, bonds, cash, commodities, REITs. The article used equal weightings of these classes.

If you tried to use same 7 classes to grow money, it lagged returns of equity based investing or standard stock-bonds asset allocation. But using only a stock-bond asset allocation, there are too many periods in history where portfolio lost value over 3 years (while also drawing down principal) which made it tough to recover using same withdraw rate as the starting value.

Recomendations for Roth IRA