Roth IRA

Brokers are all pretty much the same. The question you should be asking is how aggressively you want to invest. If you're young, you can afford to be more agressive. If you're closer to retirement age, you want to play it safe and go more conservative.

You can look at the performance of funds with any broker, but these days that's going to be pretty skewed. You might want to go conservative for a while and then get aggressive when the market stabilizes. Or you could assume that the worst is over and that it's only going up.

 

Pick up the book, "The Smartest Investment Book You'll Ever Read" by Solin. Read the first 4 or 5 chapters. Skip to chapter 36. Follow the instructions. Profit.

It's really a simple read. It's not that big either. Each chapter is only a few pages.

 

Interesting. I'm gonna have to check that out.

Here's a preview:

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Do these two things:

1. Open a Fidelity Roth IRA account
2. Invest in a Fidelity target date retirement fund

Add money every year, ignore your statements, and at 65 when you retire you will likely have done better than most everybody else.

 

There pretty much was the entire effing book, no?

 

Oops! That link only shows the first 15 pages or so.

Sorry - you can read the entire book here:

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Sorry, skip to chapter 36, not 38.


FYI, chapter 36 in the physical book is chapter 33 in droxford's google book.

 

How in the world can that be legal?

 

Don't use your bank. They'll probably have some sort of load, front end or back end. It's just dumb to get charged a fee just to buy their funds.

Use no-load funds to fund your portfolio, keep your costs down.

Vanguard is a great broker to use. It's who I use and its their philosophy, keeping costs down so you keep more of your money.

vanguard.com

I'd recommend index funds to just track the market. Using a lazy portfolio approach.

http://www.marketwatch.com/lazyportfolio

If you want to get more involved then be my guest and do more research. If you want to just buy a mutual fund, go to bed at night and not worry and just rebalance once in a while, I'd recommend this route.

If you want to try to beat the market, set aside some play money and go that route.

But even with the bear market in the past couple of years, my portfolio has recovered and above what it was before, with the lazy approach.

 

Vanguard or Schwab

I use Vanguard for my IRA. It's in a Life/Growth fund of funds because it is passive.

I use Schwab for my Roth because I use Streettalk Advisors to manage my regular Schwab account so they manage the Roth too for no extra charge.

 

Yeah, Solin talked at Google, he's in the same 'lazy investment' camp. It's all about indexing and low costs.

Passive investing.

 

This is all just my small opinion, so take it for what it's worth.

1) no load funds aren't necessarily cheaper. They have a higher annual charge (the fund managers have to get paid, ppl just normally dnt pay attn to this fact). An a-share, or loaded fund, u pay the upfront sales charge, and after 5 yrs it becomes cheaper to hold the a share.

Ex: a-share: 5.75% upfront sales charge, 1.25% annual fee. (industry avg's)
c-share (no load): 2.5% annual fee

2) don't get an index fund. Managers jobs are to try to beat the index, and really do you want all the companies in the s&p, even the crappy ones?? I hope not. If you look at some good funds you'll notice they will have the good companies in their from the likes of the s&p.

Don't pick the top performing mf from the previous yr!! Look for someone with a proven track record!! Like franklin templeton, American funds or Hartford. And then find a fund that fits ur investment objective. Vanguard funds r cheaper for a reason.

Some more general info about a Roth itself: max contribution is 5k unless u can make a catch up contribution, u can take out ur contributions (although it will fluctuate) u just can't touch the earnings until 59 1/2 or 5 yes, whichever is longer. And everyone needs a Roth!!! It's tax free $$$!!!!

 

umm...read Random Walk Down wall street, the Smartest Investment Book You'll Ever Read, and Little Book of Common Sense Investing.

 

Ummm...1) I made a disclaimer saying that was my opinion. There are thousand of ways to make money or lose. Hell, it wasn't that lomgago certain investors were raving about a certain investment and it is in the dumps.

I particularily don't like index funds. Ok, so someone wrote a book telling the avg guy to buy into one...I get it, still don't beleive in it. My theory of investing and his are different, why does that make mine wrong?

I'd prefer to buy into, say, a uit. Comprised of 30 stocks out of the s&p, all with a billion of cash on hand, roe over 15%, and all currently undervalued. Low exp ratio also. 2yr holding period. Some company holdings include co's like apple, xom, andgoogle. (small sample of co's) all companies that, personally, I couldn't afford to buy many shares of, but I realize they are great performers n I want a slice of the pie.

Now why does that Sound bad bc I don't like index fund? I just dot believe in taking the good with the bad and hope the good outways the bad. I believe in quality and finding undervalued co's, that have a sting foundation. So I mentioned said mf's with such record.

If you want I can pull the history, say last 20yrs, n show the past performance of a few funds and some index funds and we can see how my theory has compared to urs.

 

On a side note, sorry for grammatical errors but I'm on my iPhone and it's tough typing long messages at times.

 

your dismissal of index funds as part of an investment portfolio goes against everything highly regarded investment gurus have written, especially when given the historical data. you're right, it was your opinion. i don't think i bashed you for it. i just found it an unwise one.

i'm certainly open minded. so, please provide me with historical data of the the funds you mentioned and their total returns for the last 20 years. i'll leave you with this from fool.com.

Spoiler

In his presentation to the Vanguard board, Bogle presented the historical data then available to him. In his account of The First Index Fund, Bogle writes:

"I projected the costs of managing an index fund to be 0.3% per year in operating expenses and 0.2% per year in transaction costs. Since fund annual costs at that time appeared to be about 2.0%, I concluded that an index fund should reasonably be expected to provide an annual return of +1.5% above a managed fund."

In the intervening years Bogle has proven to be even more correct about indexing than he had predicted he might be. Since then, the gap between the performance of the market and the performance of actively managed mutual funds taken as a whole has actually been significantly wider than the 1.5% theorized by Bogle in 1976. During the 1990s, the total shortfall between actively managed mutual funds and the market as measured by the S&P 500 has so far been a whopping 3.4% per year.

The differential between actively managed funds and passively managed index funds is very easily explicable. The difference does not come from the actively managed mutual funds being run by buffoons. Not at all. The stocks that mutual fund managers pick end up being more or less average performing stocks. Bogle analyzes the differential as being determined by four factors: costs, turnover, sector, and cash reserves.

During the 1990s, the S&P 500 has provided an annualized return of 17.3%, compared with just 13.9% for the average diversified mutual fund. This 3.4% is explained first by understanding the fact that during the 1990s the S&P 500 (essentially an index of the 500 largest companies in America) has produced returns that are better than the rest of the market. One must first look at an index of the whole stock market, the Wilshire 5000 Index. The return for the Wilshire 5000 has been 16.3% during the 1990s, so you should count 1.0 percentage points as a "large-cap effect," bringing the gap between managed funds and the Wilshire 5000 down to 2.4%.

The expense ratio of the average fund, that is the average amount of expenses that a fund charges its shareholders every year, was about 1.3% during the period. (Over the last couple of years expense ratios have been rising further and currently stand at 1.5%.) By comparison, the Vanguard S&P 500 expense ratio is 0.19%.

Many funds also buy and sell their holdings at a rapid pace. Currently this turnover occurs at an average rate of 85% per year. This means that at the end of every year the average mutual fund only owns 15% of the same shares with which it started the year. The transaction costs involved in buying and selling so many shares every year result in an additional 0.7% of return disappearing every year.

Additionally, fund managers, believing that they can time the market, hold an average of about 8% of their portfolios in cash reserves. This practice has been a very expensive penalty during the bull market of the 1990s. This holding of cash reserves essentially explains the rest of the differential between mutual funds and the market.

Did you get all that? We sure hope so. We'll return and explain all of these concepts in further detail in Part 7 and 8, but if you are invested in any mutual fund and are not currently aware of how expense ratios, turnover, market sector, and cash reserves apply to your fund, you are investing blind.

S&P index funds have garnered a lot of attention over the last couple of years for good reason. The Vanguard S&P 500 fund has outperformed over 90% of all domestic equity mutual funds over the past three and five years (and a much higher number if you include bond and international equity funds). But S&P index funds certainly aren't the only index funds -- and in fact may not even be the best.

 

Historical results are Financial p*rn. The market in the next ten years will not (hopefully) be the same as the last ten years, or it could be and equity funds would then yield low return for their risk.

 

You're right, historical data is no indicator of future success. But I think I feel comfortable investing my money in a company that has 50 yrs of success. 40 up yrs and 10 down yrs, I can live with that. Again, it's all dependent on ur risk tolerance and investing style.

And yea, the mrkt will be the same as the last ten yrs, it'll go up and down .