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What separates Local banks and online Roth IRA 's???

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  • #16
    Originally posted by dgcoupe View Post
    just called vanguard and got some Info.. just like u guys said with my roth ira to mutual fund investment they guy said its a good start but then he started talking about bond fund and balance fund n the different types of fund that a mutual fund has or something... Mutual fund right now is .12% he said I think this is all overwhelming maybe i am not knowledgeable enough for this level of investing money or the word investment at all.. I literally feel like a person taking a 500 question test and didnt' study or have any clue whats on it.. Sorry guys I'm just frustrated!! Maybe i should go read a book first before i open up my acct with vanguard. I even told the guy i have no clue what i am doing but throwing 3k in ROTH IRA and invest in Mutual funds/money market like i am advice. I dont' know what i will totally benefit from all this since I seem blind seeing it other than my money is tax free for the year and so on.. SIGH!!


    Also he told me to take the vanguard Investor Questionnaire and i dont' even know the answer to the question but question 1.. UHG!!
    Take a deep breath and relax. There are many places to educate yourself about the basics of investing. Right at Vanguard's site, for example, if you surf around, you'll find definitions and descriptions of mutual funds, the power of compounding, your options for saving for retirement, setting goals, choosing funds and more. Other financial sites offer endless tutorials on every imaginable personal finance topic.

    I don't disagree with the Vanguard rep who was suggesting that you need to consider various fund types. As I noted earlier, though, you can't do that from day one because you won't have enough money to do so. Due to the minimum deposit, you can only start with one fund. Some will argue that you should make that one fund more diversified than the stock fund I suggested. Vanguard has some balanced funds, meaning the fund has both stock and bond holdings within the same fund. They also have the Target Retirement funds https://personal.vanguard.com/us/wha...entfundchoices which are broadly diversified and automatically adjust the allocation as you get closer to your indicated retirement age. Some folks invest in a Target fund for their entire retirement portfolio - one fund and they're done. There is a lot to be said for simplicity.

    Here's what I'd suggest. The sooner you start your retirement savings, the better. Open the Vanguard account. Send in your $3,000. Put it into a money market fund. Then take a few weeks or even a few months to educate yourself about asset allocation. During that time, continue to contribute to the Roth so that you get the full $5,000 in for 2010 (you actually have until April 15, 2011 to accomplish that). Once January 1 rolls around, you can then start working on your 2011 contribution. But at least you will have taken the first step to building your retirement nest egg.
    Steve

    * Despite the high cost of living, it remains very popular.
    * Why should I pay for my daughter's education when she already knows everything?
    * There are no shortcuts to anywhere worth going.

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    • #17
      Originally posted by dgcoupe View Post
      Also he told me to take the vanguard Investor Questionnaire and i dont' even know the answer to the question but question 1.. UHG!!
      By the way, can you post a link to that questionnaire? I can't find it at their site.
      Steve

      * Despite the high cost of living, it remains very popular.
      * Why should I pay for my daughter's education when she already knows everything?
      * There are no shortcuts to anywhere worth going.

      Comment


      • #18
        Originally posted by disneysteve View Post
        By the way, can you post a link to that questionnaire? I can't find it at their site.
        Get personalized asset allocation suggestions based on your investment objectives and experience, time horizon, risk tolerance, and financial situation.



        wouldn't my 3k grow over tiem if i jsut leave it in my ROTH IRA?

        and to double check the fact i just read online it says i can take money out of Roth IRA if i wanted to since its already taxed w/o being penalize??
        Last edited by dgcoupe; 09-07-2010, 05:42 PM.

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        • #19
          Growth depends on whether or not the monies are invested in something that "grows." All investments grow and decline up and down over time. Nothing is static nor guaranteed.

          Withdrawals are generally subject to an "early withdrawal fee" which could take a good portion of your original investment if that time has not expired. There may not be a penalty, but check into fees.

          Always read your paperwork. We can only speak in general terms when we do not have that paperwork to read.

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          • #20
            Originally posted by disneysteve View Post
            Here's what I'd suggest. The sooner you start your retirement savings, the better. Open the Vanguard account. Send in your $3,000. Put it into a money market fund. Then take a few weeks or even a few months to educate yourself about asset allocation. During that time, continue to contribute to the Roth so that you get the full $5,000 in for 2010 (you actually have until April 15, 2011 to accomplish that). Once January 1 rolls around, you can then start working on your 2011 contribution. But at least you will have taken the first step to building your retirement nest egg.
            That advice above is excellent.

            I have not read all your threads or posts. I did remember seeing 3-4 of them over the weekend, this is only one showing in my new posts feed now... if you have lots of questions, its best to work a little on each one and not focus so much on any one issue.

            This is because so much of personal finance is knowing a little about 3-10 topics, then combining that knowledge into one solution which is unique to you.

            If you are spending less than you earn, you are already 75% of the way there (really)!
            If you make it a point to pay yourself first you have another 10-15% solved too. REALLY!
            Whether you do a CD or stock mutual fund or a balanced mutual fund at age 24 in a Roth IRA is a small portion of decision- not even 1% into final result IMO. What you do in 2011 or 2012 might be better, but what you did in 2010 would not be bad.

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            • #21
              Originally posted by jIM_Ohio View Post
              A Roth IRA is an account label. Any bank representative, insurance salesman or stock broker can label the account a Roth IRA. That account is then subject to the IRS restrictions (such as $5000 in contributions per year and tax free withdraws after age 59.5).

              What is put inside the account depends on where you go- Vanguard would likely put mutual funds in it, where as a bank would probably put the money in CDs. If the bank puts you in mutual funds, its probably a load fund (to compensate the person doing the investing for you) and if you go to Schwabb it might be like the bank or might be like Vanguard- just depends how you open account there.
              The bolded part is not necessarily true. The banks can and indeed do have investment departments that will "invest" you in stocks or bonds or whatever mixture (allocation) you desire if you instruct them to do so.

              And the banks will also invest you in these types of venues (for a Roth IRA anyway) without load fees.

              The problem with going though a local bank is twofold:

              1) they have very little flexibility in the stocks/bonds funds they can offer to you. (ie they are selling a product and they do gain personally by selling that product).

              2) while there may not be "loads" for Roth IRA, there are definitely management fees along the lines of 1 or 2% of your investment. (ie a great deal more costly than the fees with the huge online (and local offices) of the big three for a great deal more flexibility in investment venues).

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              • #22
                Originally posted by dgcoupe View Post
                https://personal.vanguard.com/us/FundsInvQuestionnaire


                wouldn't my 3k grow over tiem if i jsut leave it in my ROTH IRA?

                and to double check the fact i just read online it says i can take money out of Roth IRA if i wanted to since its already taxed w/o being penalize??
                dgcoupe -- the questions in the linked questionaire have no right or wrong answer. It's not a test.

                The questionaire is designed so that they (Vanguard) can get idea or estimation about how you think and what you think about "risk."

                They want to know whether or not you'll be more comfortable with taking a greater risk (which would earn you more dollars -- usually -- in the longer term) than you would be by taking a more conservative risk (which would earn you less dollars over the long term -- usually -- by investing in more "safer" venues -- bonds, treasuries, etc.)

                How you answer the questions determines somewhat, what you think about your ability to handle "risk."

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                • #23
                  the mutual bond method.. i understand its liek a group of people investing in diff parts of something.. Its a save conservative which is what i am right now .. I think that isn't a bad idea to invest the 3k which is ab how much it cost i think.. on Vanguard. What you guys think?


                  n its sad knowing that what i am doing is not even 1% lol Shesssh hahaa

                  Comment


                  • #24
                    Originally posted by dgcoupe View Post
                    the mutual bond method.. i understand its liek a group of people investing in diff parts of something.. Its a save conservative which is what i am right now .. I think that isn't a bad idea to invest the 3k which is ab how much it cost i think.. on Vanguard. What you guys think?


                    n its sad knowing that what i am doing is not even 1% lol Shesssh hahaa
                    stocks versus bonds....

                    They play in a teeter-totter way (when stocks go up, bonds will go down; when stocks go down, bonds will go up).

                    If you have a long range period of time -- as you do -- please consider stocks.

                    There are "safer" stocks, and there are risky stocks.

                    The safe stocks tends to be the huge conglomerate companies that produces goods that humanity depends on. Look at the Food industry, look at the Health industry.

                    Looks at things that humanity cannot live their accustomed lives without in the long-term. Pick one company for now, research into other industries later; worry about diversification and allocation later.

                    Just do not limit yourself to bonds right now. You are too young to limit your future compounding possibilities with bonds as a majority of your portfolio.

                    Also -- whether you are talking mutual bonds or mutual stocks -- mutual is the key word. Both pool their monies ("mutual"), but one is going to grow faster than the other, long term.

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                    • #25
                      but i dont even know how to read a chart nor figure out what i am looking at.. sp5-- down -XX poitns ok? and? lol Im oblivious to all this!

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                      • #26
                        If you're interested in Vanguard, look at the below chart:



                        The ones on the right most side have the greater risk (mostly stock, very little bonds)

                        The ones in the middlish are more "balanced" 60/40 ratio of stocks to bonds.

                        Generally the people closer to retirement should take advantage of a "balanced" risk fund (middle of the chart above) or a low end risk (almost entirely bonds).

                        Generally the people closer to your age (24) start out at the most risk with almost entirely stocks -- you have a long way to go for retirement.

                        Another thing you can do, is ask Vanguard about your ability to move the monies from one fund into another when you learn more about "investing" in general. Ask if there are fees or penalties associated with doing any of that within a Roth.

                        ---

                        Do not ignore dollar cost averaging. With contributing a fixed amount of dollars each month, you actually save money in the long term. This is because when you set a fixed amount, you need not worry about what the fund does. Essentially, when the stock/bond fund goes down, you are buying more shares when you contribute with your fixed (unchanging) dollar amount monthly. When the stock/bond fund prices goes up, you buy less shares with DCA monthly. Over the long term, the price/share smooths out; and your "investment" smooths out.

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                        • #27
                          i wish i could just follow what u guys are doing and buy w/e u guys are buying and hopefully I can land a jackpot like u guys have... you knowledge is better than mine at this point

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                          • #28
                            Originally posted by dgcoupe View Post
                            i wish i could just follow what u guys are doing and buy w/e u guys are buying and hopefully I can land a jackpot like u guys have... you knowledge is better than mine at this point
                            dgcoupe -- Financial "knowledge" comes with research and experience -- but nobody knows what the market will do. Financial stuff is pretty much based on perceived supply and demand ; and perceived worth. So everything is a "guess" in reality. The outcome is only two: win or lose so the outcome is always 50% that you will win some, or 50% that you will lose some.

                            Over time (and the longer the time frame), the greater the chances for a net gain. Again, the advantages of Dollar Cost Averaging, saving (even a little bit) consistently over time, and not touching it, will gain you more that you would expect with ANY fund.

                            I don't have any experience with Vanguard funds, but what I recommend you do is call them up again and ask them which fund they have available in a Roth IRA format, not to exceed $3k minimum initial investment, with a 60% stocks to 40% bond ratio (if you are comfortable with that mixture of investment -- which technically is rather middle -- balanced -- or conservative for your age and time you have until retirement).

                            Preferably the stock portion of the investment within whichever fund you choose, would be in Large Cap (huge companies that everyone purchases their products from -- Proctor & Gamble, Johnson & Johnson, General Electric, etc) Stocks. Ask them which Funds center on those kind of huge companies and what percentage of bonds are in the mixture.

                            Basically, all we are trying to say to you is this: Invest, learn, and invest some more. Over time (over the 30+ years that you have until retirement) your money will grow faster in stocks than they ever will in a bank account or a purely bond account.

                            The only mistake you can make at this point in time, is to be paralyzed by the indecision you are in. Choose something and go with it. You can allocate other dollars in future months and years to balance it all out.

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                            • #29
                              Originally posted by dgcoupe View Post
                              wouldn't my 3k grow over tiem if i jsut leave it in my ROTH IRA?

                              and to double check the fact i just read online it says i can take money out of Roth IRA if i wanted to since its already taxed w/o being penalize??
                              Let me clarify what I meant when I said a CD wouldn't grow. In absolute dollar terms, yes it will increase in value. In inflation-adjusted terms, however, it will not.

                              Let's say you put $3,000 into a CD earning 1.5% interest.
                              After one year, your account balance will be $3,045.
                              If during that year, the inflation rate was 3%, that $3,045 will have the actual buying power of only $2,954 a year earlier. So you will have more money but it will be worth less. Do that for the next 40 years and when you retire, you won't have enough money to live.

                              When people recommend investing in "growth" investments, what they are really saying is to invest in something that will earn more than inflation so that over time you actually have more money than you started with, not less.

                              As for Roth IRA withdrawals, I am of the firm belief that retirement accounts are for retirement - period. It would have to be a dire catastrophic emergency that would convince me to tap into my retirement savings for anything else.

                              The rule is that you may withdraw money you have contributed to your Roth at any time for any reason. You may not withdraw earnings, just contributions. So if you bought that CD and in one year, something terrible happened and you needed that money, you could withdraw $3,000 but not the $45 the CD had earned. My advice? Forget that rule exists. Don't treat your Roth as anything but an untouchable account earmarked for retirement.
                              Steve

                              * Despite the high cost of living, it remains very popular.
                              * Why should I pay for my daughter's education when she already knows everything?
                              * There are no shortcuts to anywhere worth going.

                              Comment


                              • #30
                                Originally posted by Seeker View Post
                                Another thing you can do, is ask Vanguard about your ability to move the monies from one fund into another when you learn more about "investing" in general. Ask if there are fees or penalties associated with doing any of that within a Roth.
                                I can answer that with 100% certainty. There are NO fees or penalties for moving money around between funds at Vanguard within your Roth account. It is very, very simple and can all be done online with a few mouse clicks. I've done it many times.
                                Steve

                                * Despite the high cost of living, it remains very popular.
                                * Why should I pay for my daughter's education when she already knows everything?
                                * There are no shortcuts to anywhere worth going.

                                Comment

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