ROTH IRA account with Fidelity... what to do now?

Question

At my mother's suggestion, I opened a retirement account with Fidelity. I am now automatically investing $200 every month from my bank account to their Fidelity Freedom 2050 fund.

I am, however, paranoid about my hard-earned money and log in every week to sometimes see more money, and sometimes see less. My Fidelity adviser tells me that I can just leave the money there and not do anything, and by the time I retire, I'll be sitting on a goldmine.

Somehow I don't believe him... should I be doing more than just letting $200 go to my Fidelity account every month, and not doing anything?

Answer 1

Sounds like your advisor and your mother are giving you good advise! The only thing that would be better is if you get a 401k through your work where your work will match some of what you contribute. Keep putting 200 bucks in that account every month and you will be a millionaire by the time you retire!!!

Answer 2

The advice of your Fidelity Advisor and your mother was EXCELLENT. I only have a couple of things to add.

Congratulations on being wise and doing a very smart thing.

1. A Roth IRA has a limit or 4000$ so as you can afford it increase your limit to the Max.

2. If you are lucky enough to have a 401K plan at some point
fund your 401K to the max of the company match.((FREE MONEY)) Then fund a ROTH IRA and then fund the rest of your 401K to the max . Then taxable investments If you have any money left.

The Freedom Funds spread your allocation into an Asset Allocation appropriate for someone with that time to retire.

If you choose to study investments you can decise to move the money after you have 30,-40,000 otherwise just keep it where it is chugging away doin Dollar Cost Averaging and making you money.

The absolute most important thing you can do is nothing. DONT TOUCH IT FOREVER ... well at least until you retire.

Costs Count
Stay the course
Keep Investing.

Good Luck Gerry

Answer 3

I personally use Fidelity and I really like their service. I don't think that there is a material difference between the companies. They are all very large, secure, no-load companies. If you check out the web site for the three fund families that you mentioned, they will all most definitely have a link that talks about all of their 4 & 5 star rated (Morningstar Rating) funds. You may want to choose the fund family that has the most highly rated funds over a broad spectrum of investments. That is why I like fidelity. Most of the target retirement date mutual funds invest the majority of the assests in mutual funds of the same mutual fund family. In this respect, it is probably better to pick the family that has the largest and most diverse portolio of funds. It is a very good investment choice for a small investor. Try to also pick a family or service that will offer you options down the road. I know you can invest in stocks, bonds, and annuities with Fidelity, I'm not sure about T.Rowe and Vanguard. My point is, you my want that feature in five years. I strongly encourage you to investigate the websites for all three. Ask yourself what kind of research and analysis features they offer you. If you are 25 and saving for retirement, you're already a leg up on most Americans. Down the road, you'll want many of those features.

Answer 4

You received some great advice in the above three answers all worth a thumbs up. I would just add to not check every day or even every month. Check it quarterly to satisfy your curiosity. It's not a savings account. The past week was a disaster and probably would put you in a panic. You are in it for the LONG haul which means a lot of fluctuations. Stock market average returns since 1929 are about 10% a year. Way better than anything else. Good luck to you. And pursue that 401K vigorously.

Answer 5

The only thing that you are doing wrong is that you check your balance every week. Statistically, the more often a person checks their balance, the worse that their investments do. This is because persons (such as you) who become concerned every time that the balance briefly goes down tend to move the money just when the balance was about to go up.

Goldmine is an exaggeration, but investing every month and not worrying about whether it goes up or down in any particular WEEK as long as it goes up on average OVER THE LONG TERM (PERIODS OF SEVERAL YEARS) is a good plan.

Answer 6

NOPE! Bad advise. The Fidelity advisor is not correct at ALL, though I give your mom props for getting you started. You should monitor your account, roughly, every quarter. See the Freedom plans offered by Fidelity suck...plain and simple. They don't know what your needs will be when you retire, so how the hell do they know how to invest appropriately for you...they don't. Its just a product, sold to the masses, who have no clue what to do about their financial future. Don't get me wrong, I love Fidelity. I have a Fidelity account, of which I actively trade from and have an IRA with them as well (of which I am on top of: 28% returns, year to date). I also just helped my mother-in-law role all of her floating 401(k)s into a new IRA with Fidelity. So I stand by them, just not their Freedom Choice plans.
You need to diversify your portfolio in order to meet your needs. The smarter you become about this, the better off you will be. Break up your portfolio into pieces of a pie. If you want, start off easy breaking it into quarters. As you get better at this, you can increase the portions that other parts of the pie get (i.e.: 25/25/25/25 can change into 15/15/30/40). You then pick a Bond fund. Something with a high Lipper and/or Morning Star (4or5 stars only!) rating. Then move to a large cap, value fund. Same ratings apply. I would then look at an international blended fund (meaning its both growth and value) and then a specialty fund ( i look at natural resources or energy, as these are big areas that aren't looking at dieing off anytime soon). When choosing the funds, I would stick within the same family. Fidelity has a good family of funds, so you can select from their funds if you would like (NOT THEIR FREEDOM CHOICE). When keeping it within a family, you are saving money when you want to transfer your money from one fund into another...WHICH IS ESSENTIAL!.
So lets say three months ago you had allocated 25% of your money going into a Natural Resources Fund. Well, that fund has grown now to be 30% of your overall portfolio, taking 5% from somewhere else. Excellent you have growth, but you also want to KEEP that money. So take that 5% and transfer than money into anothe fund, likely your bond fund (As they are the slowest growers, but the most steady). As you capture these gains, and reposition them into your Bond fund, you are preserving them and keeping your portfolio well-tuned like a car engine. As time progresses, you can adjust your allocation percentages. I prefer 30% speciality and 40% international growth. When looking at the fund, you can see where they are distributing their funds.
The Fidelity Freedom funds claim to be doing this same thing, but they do it a very conservative, and often times negative, growth rate. Its simply a product, thats all. Understanding how you can master your own portfolio will save you tons. It will empower you with knowledge that is expensive if sought out professionally. And it is something you can pass on to your children, for them to know...as you are now starting a legacy. Hope this helps. Good luck!

Answer 7

Good for you. Your advisor is correct. At this point in your life, the fund is heavily invested in the stock market, so in the famous words of J.P. Morgan, "Stocks tend to fluctuate."

The good news is that when stocks go down, you are taking advantage of lower prices because you are investing monthly.

In the long run, like 10, 20, 40 years out, stocks will go up a lot faster than other forms of savings, and also as you get closer to your retirement date of 2050, the mix will become more conservative so won't fluctuate as much.

Answer 8

Just let it alone, When you do retire, in probably 40 + years all of the growth will be "tax" free.

Look at it every 6 months to a year, and keep saving, you will not regret it in the least.

Answer 9

Its a solid and low risk way to invest. Leave it there, continue to contribute and let it grow. Don't worry about short-term ups and downs in the market. You are investing for the long term.