Roth IRA investing

[frugalfriend]

Called one of Dave's ELP's in my area to have two small Roth IRA's rolled over to a new company. Seems the company we are with doesn't want to keep one of our Roth's since it recently fell below $1,000. and will be sending us a check! Hmmmph! Well, I was going to roll them over to another company anyway and add our tax return to them since I didn't like how they were invested (opened them pre-Dave). The ELP I talked to was extremely helpful and nice but does not do investing, only financial counseling. She did give me a referral and also some insight on doing it myself. She said she invests herself and doesn't use anyone. Suggested I call either Vanguard, Fidelity or Schwab, and do the 25%-25%-25%-25% diversified just like Dave teaches. I am considering doing this on my own. Anyone done this, have thoughts? Greebo?

Thanks!

[Greebo]

How much do you want to learn about mutual fund investing?

If you want to learn about it so that you can do it yourself, that's one conversation. If not, then you should look for another adviser - one who *does* do investing. Any of those firms should be able to steer you to an adviser - shop around until you find one who:
1) You can communicate with
2) Has the heart of a teacher
3) Understands what you mean by Dave's 25x4 split.

[frugalfriend]

I (a little nervously) want to learn how to do it.

I am curious though if I chose to have someone do it for me, what the approximate costs involved are. Somewhere I could look online? That would help me in making this decision. We're not talking a lot of money to invest here, but want to start regularly adding to it over time, and of course want it done right (already had it done wrong the first time ).

Maybe I should just play it safe and go with the referral?

[Greebo]

I (a little nervously) want to learn how to do it.

Ok - then first things first - do you understand what a Mutual fund is?

Vanguard has some highly rated funds. I am not as familiar with Fidelity. Schwab is more of a 'do it yourself' broker, I think, with more general access to the open market but I don't think they offer any products themselves - I may be mistaken however.

I am curious though if I chose to have someone do it for me, what the approximate costs involved are. Somewhere I could look online? That would help me in making this decision. We're not talking a lot of money to invest here, but want to start regularly adding to it over time, and of course want it done right (already had it done wrong the first time ).

Costs will come out from your investment or in the forms of commissions, and vary depending on the firm.

If you open a Roth, for example, with TD Ameritrade, they'll charge you about $11 per trade. If you go to American Funds (via Nationwide) they'll charge you.. oh I think it's half a percent up front.

Maybe I should just play it safe and go with the referral?

Or maybe you get yourself a pool of people to whom you run your situations and ideas past - as Dave quotes from his Bible, there is wisdom in seeking counsel.

[frugalfriend]

Ok - then first things first - do you understand what a Mutual fund is?

I'm learning, slowly learning . . .


Or maybe you get yourself a pool of people to whom you run your situations and ideas past - as Dave quotes from his Bible, there is wisdom in seeking counsel.

But, Greebo! Didn't you know that I run most of my situations and ideas past YOU??? LOL! I don't know anyone else who understands DR's concepts as well as you do.

[ncarr]

I have a roth ira through USAA. I like target retirement funds. For example mine is a 2040 fund b/c that is roughly when I will be able to retire. They start out more aggressive and the holdings become more conservative as you near retirement. They are a nice because the fund manager does all of the work and my contributions are deducted automatically.

[Greebo]

I have a roth ira through USAA. I like target retirement funds. For example mine is a 2040 fund b/c that is roughly when I will be able to retire. They start out more aggressive and the holdings become more conservative as you near retirement. They are a nice because the fund manager does all of the work and my contributions are deducted automatically.

They're interesting, but the problem with them IMO is you cannot gauge past performance. They're too new.

[StanleyJohnson]

I have a roth ira through USAA. I like target retirement funds. For example mine is a 2040 fund b/c that is roughly when I will be able to retire. They start out more aggressive and the holdings become more conservative as you near retirement. They are a nice because the fund manager does all of the work and my contributions are deducted automatically.

I tried the target funds through Fidelity and lost my butt.
I used to believe in target funds but have switched to Vanguard index funds. So far so good

[Greebo]

But, Greebo! Didn't you know that I run most of my situations and ideas past YOU??? LOL! I don't know anyone else who understands DR's concepts as well as you do.

Ah, I see your quote got buried in my post.

"I'm learning, slowly learning..."

Ok so you understand that a Mutual Fund is basically a collective of multiple products, and the types of products in the fund define the type of fund.

So a "Stock Mutual Fund" is a Mutual Fund containing a lot of stocks. A "Bond Mutual Fund" is a mutual fund containing a lot of bonds.

By its very nature, a mutual fund is diversified - a mutual fund may own stock in industry and technology and health care - and if industry goes down, the fund is balanced out by tech and health staying strong.

Dave teaches to look for good growth and growth income stock mutual funds. He doesn't like bonds and bond funds (and I don't either). He wants you to diversify your diversification - thus his four general categories.

So if you want to do this on your own, then it comes down to a few things:
- Who will you work with - your broker
- What will you invest in - your funds

Dave generally covers the what - but he leaves it up to you to do - or find someone to help you do - the research.

The who - that's all up to you. If you really want to go it alone, a company like TD Ameritrade is fine - you can set up automatic contributions to them, and then periodically buy the funds you like over time. You pay a flat rate - $11 per trade - and you get access to a lot of tools but no other real help.

If you want a little more help, a company like Legg Mason or T Rowe Price or other similar firms can help - they can set up accounts and you can set up automatic purchases (heck TD may support that too) or you can get an adviser.

Pretty much no matter who you work with you'll pay nothing out of pocket, but instead out of your IRA. If you move money to TD and buy 1000 shares of a fund at $1 a share you'll pay $1010.99 total from your available cash in the IRA and get $1000 worth of the fund.

The key here is to invest long term. There are LOTS of mutual funds out there - and lots of tools to help you screen out the ones that don't qualify.

You want:
- funds > 10 years old
- funds with track records *since inception* of > 10% annualized ROI

The last year doesn't matter. My 401k has grown 47% in the last *year* - but over the last 3, lost 6%. It's the LONG term - 5 years or longer, that you look at for mutual funds.

[Greebo]

I tried the target funds through Fidelity and lost my butt.
I used to believe in target funds but have switched to Vanguard index funds. So far so good

How long did you try the funds?

[McD]

I've been using the target funds for my 401k and even during this recession, I have also had positive gains. Take that with a grain of salt because what works for me, might not work for you.

[frugalfriend]

Dave generally covers the what - but he leaves it up to you to do - or find someone to help you do - the research.

That is so true and what I've also found from listening to him. Thanks for all the info. I want to continue studying and learning about investing but in the meantime I've decided to go ahead and call the investment ELP and just get it done! I have been pondering all of this over the last few days and I've decided I am just not experienced enough and too much of it is greek to me. I do know enough of what NOT to do!

[a.nonymous]

That is so true and what I've also found from listening to him. Thanks for all the info. I want to continue studying and learning about investing but in the meantime I've decided to go ahead and call the investment ELP and just get it done! I have been pondering all of this over the last few days and I've decided I am just not experienced enough and too much of it is greek to me. I do know enough of what NOT to do!

Way to go! Getting the first step done is usually the hardest.
Now, there's only one thing to keep in mind: The long term usually takes much longer than we think.

In other words: Don't get impatient or disheartened if your funds do not perform as well as the track record suggests. It will outperform at some stage. The reverse is also true. Jsut because you happen to have a (few) stellar years, don't count on it, either.

[Thevail]

Also just as a note, you'll pay a lot less over time with an indexed mutual fund of some type, because there are very small managing fees for those (called expense ratios). And since way less than 20% of fund managers ever beat the index for longer than a year or two, the index fund is usually your best bet.