Questions about Roth IRA?

Question

1. Who to get to open one? I know I can get my local bank to open it or even my insurance carrier but are there benefits of using one over another?
2. Can I actively trade securities in the account? I guess this goes back to the first question because if the answer is yes then I want to use a service that charges the least comission rates.

Thanks.....

Answer 1

Don't even consider using single stocks in a Roth IRA!!

Roth IRA's are intended to provide safe growth for retirement, not to gamble on the market.

Use Mutual Funds for growth. If you are young, under 35 or so, open three Roth IRA's. Invest about 1/3 of your planned savings in each. Have one ROTH invested in a stable, Growth Income Fund. Have a second Roth funded with a medium risk fund such as High or Low Cap funds. Use the final third of your investment funds to invest in a high risk mutual fund such as a venture capitol or emerging market fund. The first fund will have steady, non-spectacular performance, choose a fund that has a good, long track record of dividend and capitol gain disbursments so that you have little risk to your principle. The medium risk fund will have wider swings in highs and lows with some risk of loosing your principle, but you also have a good chance of making some spectacular gains. The high risk fund is just that, risky. Do your research and choose a fund that has a good performance record.

Above all, pick your funds and stick with them. If the market drops, grit your teeth, take a big dose of anti-acid and ride it out. When share prices are down, you can purchase more shares for the same amount of investment, and chances are, the share prices will bounce back if you are patient. Where you loose money on mutual funds is by constantly swapping from one to another. Like I said, pick a fund and stick with it.

As for commission rates, there is not a lot of difference in the various funds. Some try to hide their fees, but they are still there. I prefer to invest in funds that take their commissions off the front and then do not stick me with a redemption fee when I withdraw money. The best way to reduce the fees you pay is to invest a large amount of money at the beginning. Many mutual funds will give you the reduced fees on lower initial investments if you sign a pledge agreeing to make investments totalling enough to trigger their break-points during the course of one year. If you fail to meet the minimum investment required to get a commission break, they will charge your account with the additional fees.

In a mutual fund, YOU don't do the trading, highly trained professionals do the trading for you, and you do not own any single stocks, but you own a share of all the mutually owned stocks. Constantly swapping from one fund to another will cost you more than it will earn you. In fact, if you do such swapping under the advise of a Registered Representative, it is called churning and can cost the Registered Rep his SEC Licence. So don't churn yourself into a major loss.

Doc Hudson

Answer 2

What do you mean by "minor?" Never heard of a "minor" IRA -- Roth or Traditional... The maximum annual contribution to all IRAs combined is the lower of your earned income for the year or $5,000. If you are age 55 or older you can kick in an extra $500 per year. If you kick $5,000 into the Roth IRA then you cannot put anything in the Traditional IRA and vice versa. Or you can split contributions between the two any way that you choose, up to the above limits. Any excess contributions attract a 6% excise tax for every year that they are left on deposit in the IRA. That's enough to wipe out any gains in many years so you want to avoid that.

Answer 3

Worst places for any investment(s);
Banks
Insurance Companies.

High fees, poorly trained representatives and sometimes a lack of what's best for the customer are their trademarks.

You can use a good brokerage firm like;
Charles Schwab
Fidelity Investments

There you can purchase;
Mutual Funds
Stocks
Reits
Bonds
Bank CD's (only for a very small part of your portfolio... if that)
ETF's

Read at least 2 books on retirement investing. It will save you thousands of dollars over a lifetime.

RE: Doc Hudson
I disagree with much of what they say. Further proof that there's a lot of people out there with mis information.

Individual stocks, with the right asset allocation may work for you. Mutual Funds with the right asset allocation will also work for you.

regarding funds........ with the right "asset allocation" model you can pick low fee, no load (no sales commision) mutual funds. The only thing a "load" does is pay a sales rep. DOC suggests you only buy front loaded funds. If you must pay commisions... I agree. But... you really don't have to pay commisions. LEARN ASSET ALLOCATION. Use Morningstar to fill in your "asset allocation" model. You'll do fine.

Answer 4

I agree with Rick. And IRAs are usually for long term thinking.

If you're looking to invest, I would recommend you start by reading about buckets in Ray Lucias books.

Answer 5

The best place is with a mutual fund company - like fidelity.com.

I would recommend mutual funds, not single stocks.