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Old    Ray Markham (wakeborder5)      Join Date: Jun 2002       03-28-2011, 7:04 AM Reply   
Hey guys,

I'm looking into investing in a Roth IRA. I've been talking to the old man, but thought I'd get some imput since many of you guys are pretty knowledgeable.

I'm 21 and looking to invest 3-5k while I'm in a lower tax bracket.

I need advice on where to invest (e.g. mutual funds, brokerage firms, online brokerage). I think the best bet would be something involving mutual funds for lower risk and since I am not as knowledgeable on the stock market as I would hope to be at this point, but I hope to improve on that soon. Any suggestions/advice is appreciated.
Old    Jason G (jason_ssr)      Join Date: Apr 2001       03-28-2011, 7:28 AM Reply   
Consider your age, not knowledge, when contemplating how aggressive you are.
Old    Jeremy (wake77)      Join Date: Jan 2009       03-28-2011, 8:28 AM Reply   
I have a Roth IRA (have had it since 2003). Talk to a financial advisor and given your age, most of your funds should be towards the aggressive side. As far as mine was concerned, all I did was fill out the necessary paperwork and he did the rest (as far as the allocations are concerned). I made almost 3,000.00 on mine for 2010. One of the best thing you can do at your age.
Old    Paul (psudy)      Join Date: Dec 2003       03-28-2011, 9:19 AM Reply   
Yeah, but what did you loose in '09!
Old    Darrel F (95sn)      Join Date: Sep 2005       03-28-2011, 10:19 AM Reply   
I like ETF's, very much like a mutual fund w/ lower fees. I dont have a ton of faith in brokers, I read and invest for myself thru scottrade. Pick some areas you are interested in and research it. Stay diversified.
Old    Nacho (denverd1)      Join Date: May 2004       03-28-2011, 10:31 AM Reply   
Are you utilizing a traditional IRA and taking advantages of those tax benefits? I advise people to make use of the deductions that come with a traditional IRA or 401k plan before starting a Roth. At least if you are just starting out anyway. If you had 50 or 100K in a traditional IRA, then adding to a Roth would make sense as you would have both pretax and after tax investments. Unless there is some reason you can't take those deductions, that would the first place to start. To me, it just doesn't make sense to pay taxes on your earnings if you can avoid it. I know there will be arguments for and against a Roth, but thats my opinion.

Use trusted names if you buy mutual funds. ETF's can be good, but do your homework if you're doing this yourself. Some of them are leveraged and can add more risk than you need. Diversify.

BTW I've been an advisor for about 10 years. I'd recommend finding an advisor you can trust and work with them.
Old    Michelle Cardelli (wakenymph)      Join Date: Mar 2011       03-28-2011, 10:35 AM Reply   
I have one, i dropped $5,000 into it. Dont know what it is or what it does. all i know is that it is there and i cant touch it until im 65.... im 28..... grrrrr
Old    Tim C (lifetimewarranty)      Join Date: Oct 2008       03-28-2011, 11:12 AM Reply   
Check this guys info out. He's been a big promoter of Roth's forever

http://www.clarkhoward.com/
Old    John Anderson (fly135)      Join Date: Jun 2004       03-28-2011, 11:16 AM Reply   
Being young and in a really low tax bracket is a good indicator for getting a Roth over an IRA. The stock market is high right now. I think the typical advice in a market like this is to break your investment up and get into the market over a period of time. If the market was low like after a crash you could just jump in with both feet.
Old    Paul (psudy)      Join Date: Dec 2003       03-28-2011, 11:52 AM Reply   
"Being young and in a really low tax bracket is a good indicator for getting a Roth over an IRA"

This.
Old    Ray Markham (wakeborder5)      Join Date: Jun 2002       03-28-2011, 12:12 PM Reply   
John, thats a good point about the stock market being high right now. What are the other options besides CDs? Also, is it possible to move between investment vehicles in a Roth (e.g. getting a CD now and moving to the stock market if and when it goes back down)?
Old    Brett W (brettw)      Join Date: Jul 2007       03-28-2011, 1:26 PM Reply   
The younger you are, the better for investing in a Roth vs. a regular IRA, in my opinion. That's due to most people being in their smallest tax bracket when they're younger and with that money being able to grow tax free from then on. 1st, though, if you have an employer with matching 401k contributions, always contribute the max up to what the employer matches 1st since that's a 100% immediate return.

As for funds, if you're not sure, you can always go with targeted/tiered funds. You can google them or search for them with each brokerage you're thinking about opening an account with. Basically, you pick a retirement year, and a larger % is invested in stocks/more risky investments in the beginning. As you get older, the investments shift into less risky investments.

Many of the online brokerages will work fine. Fidelity or maybe Ameritrade are fine, just to name a couple.
Old    Ed (elc)      Join Date: Jan 2008       03-28-2011, 2:06 PM Reply   
Choose either a Roth or a traditional IRA, pick something that has a low cost and contribute every month to it. I started when I was 20 because I had a "friend" that was a financial adviser. He had me invest in a high cost mutual fund that I knew nothing about (I am sure he made commission off the sale)... basically I kept it for a couple years and realized I was paying high fees for someone to "manage" my money and everything I was contributing, was going to fees. Even though he gave me bad fund advise he got me started in positive saving habits, I am grateful for that.

You will get all kinds of advice but really the easiest thing to do is pick a low cost index fund like a Vanguard total stock market index fund (just using this as an example) and contribute to it consistently. Don't monitor it every day, don't listen to all the white noise when the stock market is dropping, just set a strategy and move forward. If you invest $3k now and contribute $100 every month, in ten years it will be around $23k in 30 years it will be $146k assuming an average growth of 7%.
Old    Small Light (stephan)      Join Date: Nov 2002       03-28-2011, 3:14 PM Reply   
Everyone here has given you pretty good advice. ETFs are good if you want to keep your expenses down, Mutual Funds are good if you want broad diversification, banks and CD's leave a lot to be desired now. I would recommend working with an advisor, it helps get you going the right direction and gives you someone to bounce different ideas off of. As an advisor, the funds I recommend not only get you invested but they pay for a (hopefully) long-term relationship between myself and my clients. There are a lot of guys that will take your check and forget about you. Instead of a broker, try and find your self a financial planner, that's the person that will be there for the long haul.

Don't try and time the markets too much, you will make yourself crazy as you will never hit it perfect. Instead of sitting on the sidelines in a CD, make sure you have a diversified portfolio (I use stock/bond mutual funds) that will balance out the highs and the lows. What a few of the fellas have suggested is regular investments (monthly, quarterly etc etc), this is called dollar cost averaging and insures that you don't buy at the high or the low, but the annual average. This investment is for retirement so don't stress about the short-term ups and downs, you have years to grow with the market. Balance and sound long-term investments will get you where you need to be.

wakenymph, don't stop there! I promise $5,000 will not get you where you need to be. The limit is $5k/year (unless you are over 50). Make the most of it! Nowadays 28 is late! The sooner the better, the power of time is the youth's greatest asset!!!
Old    Ray Markham (wakeborder5)      Join Date: Jun 2002       03-28-2011, 5:31 PM Reply   
Great advice guys, thanks. I just did my tax return today and after the education deduction, I have no taxes and am getting it all back, so I'll be doing the roth and just need to figure out which investments.

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