Trad IRAs- are any funds not going downhill?

[LostInSpace]

Hello,

I'm 31 years old, single, and am looking to open a traditional IRA.

Everyone I know has seen their IRA accounts drop dramatically in recent months. While I understand that in the long run the returns should make up for this, I'm wary of putting $5,000 into a fund that's going to lose value for the foreseeable future.

Any suggestions where to open the IRA account? Specific funds? Thanks for any help on this.

[disneysteve]

Pretty much all stock funds are down. That's a good thing for someone just starting out like yourself. If you don't want to see it all drop, don't put it all in at once. Maybe put in $1,000/month for 5 months.

[FrugalIII]

I agree. Dollar cost averaging and diversification are the keys. Don't put all your eggs in one basket and for sure don't put them all in there at once. I think most of us have experienced a loss recently. But it could be a lot worse. Remember Enron? Look at the Madoff case. It could be a lot worse for most of us.

[Broken Arrow]

For someone in their 30's and perhaps worried about the stock market should not have all of their money in the stock market anyways. In fact, if you were to ask John Bogle what the allocation should look like, he would say as much as 30% should be placed in income investments such as bond funds.

When you have your asset allocation set correctly, your should not have to worry TOO much about the stock market.

[LostInSpace]

Thank you very much for all of the comments and suggestions. My gut instinct was to consider not putting money into an IRA right now. But if I'm reading things correctly here, an IRA is still not a bad idea, even with the market sliding.

So I'll continue researching funds (bond funds as well) and start dollar cost averaging until the April deadline.. and then hang tight when the monthly statements start showing declining balances (yikes!).

Thanks all.

[LostInSpace]

Just wondering now about CD IRAs. Would this make any sense? Granted, making 2-3% apy (the UmbrellaBank in AL is offering 3.44 currently) isn't that exciting, but at least the value would not go down.

[Broken Arrow]

To be clear, an IRA is just a tax shelter. It doesn't dictate what investments you have within that shelter per se. For example, my credit union offers an IRA account, but they use CDs within that IRA as the investment. Contrast that with my current IRA with Scottrade, which I use to buy and sell company stocks.

Of course, not all institutions will offer the exact type of investments that you are looking for, so you'll want to make sure you open your IRA with someone who has the investment types you are looking for.

Speaking of IRAs offering CDs, I typically would not recommend it unless you needed that money fairly soon. For example, if you're like me and view your IRA as a place to stash your house fund you may be using somewhere in the near future, then yeah, I would consider something like a CD IRA (as I do the same). However, that to me is more like an exception rather than the rule, and the rule for IRAs is to use it as it was originally intended, which is retirement. And for long-term investing for retirement, it would be best to not kick the stock market option out the window just yet....

But yeah, there's nothing wrong with simply opening an IRA. It doesn't automatically mean that you will have to invest in the stock market.

[LostInSpace]

Thanks for the reply, Broken Arrow. i think i understand your point about CD IRAs and their place in retirement planning. Perhaps going with a solid stock fund will in the long-run be more beneficial than worrying about short-term losses.

Your insight is appreciated.