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Clueless on investing but want to start a Roth IRA

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financialdummy
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Clueless on investing but want to start a Roth IRA  Reply with quote  

Hello,

Just as the title states, I am very much clueless when it comes to any sort of investing. I don't follow the stock market, don't know what any of the pluses and minuses mean, etc. However, based on articles I've read and suggestions given to me by friends, I have decided that a Roth IRA would be a good thing to start.

If I were to start a Roth IRA, would I need knowledge in investing? If so, I wouldn't know the first thing about where to put my money.

Also, where would be a good place to start a Roth IRA? Some people have suggested Vanguard.

Kind of lost here and would appreciate some guidance.

Thank you.
Post Sun Jul 03, 2011 9:06 pm
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oldguy
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quote:
Also, where would be a good place to start a Roth IRA? Some people have suggested Vanguard


Well, for the most part, you are on the right track - so don't underestimate yourself. Very Happy
Yes, the no-load fund companies such as Vanguard of Fidelity are excellent for a Roth account, much better than banks, insurance companies, etc. If you are young, put SP500 Index Fund shares in the Roth account, they grow with the stock marrket, they are diversified across the whole market, and their cost fees are low. And, with history as a guide, they have performed better than most other choices.
Don't buy, sell, rade - just buy incrementally (monthly) and keep accumulating - it is a longterm program - accumulate steadily until you retire.
Post Mon Jul 04, 2011 2:04 am
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helpmepleasethanks
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Hi -

I'm pretty clueless too, but I would recommend setting up one on sharebuilder (ING Direct)... I think its ingdirect.com or sharebuilder.com

You can choose mutual funds and research them on the website
Post Mon Jul 04, 2011 4:06 am
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birdtrax
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A roth is a good choice, you pay taxes up front but don't have to pay again. I would suggest Vanguard (lowest fees) or TROWE. Choose a target fund, the year you plan to retire or a Bond find for mega safety. I would invest monthly to get the best average cost basis.

Its quite easy to setup an account with either company and they will help you over the phone if you need help, TROWE has the better over the phone service.
Post Mon Jul 04, 2011 6:25 pm
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financialdummy
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quote:
Originally posted by oldguy
quote:
Also, where would be a good place to start a Roth IRA? Some people have suggested Vanguard


Well, for the most part, you are on the right track - so don't underestimate yourself. Very Happy
Yes, the no-load fund companies such as Vanguard of Fidelity are excellent for a Roth account, much better than banks, insurance companies, etc. If you are young, put SP500 Index Fund shares in the Roth account, they grow with the stock marrket, they are diversified across the whole market, and their cost fees are low. And, with history as a guide, they have performed better than most other choices.
Don't buy, sell, rade - just buy incrementally (monthly) and keep accumulating - it is a longterm program - accumulate steadily until you retire.

Thank you for your help. I'm turning 29 in a couple months, which I've read is a bit late to start in this game, but better late than never. Smile

quote:
Originally posted by helpmepleasethanks
Hi -

I'm pretty clueless too, but I would recommend setting up one on sharebuilder (ING Direct)... I think its ingdirect.com or sharebuilder.com

You can choose mutual funds and research them on the website

I actually have a business savings account on ING Direct at the moment so setting one up on Sharebuilder may indeed be more convenient since everything would be in one place. If you don't mind, can you explain why you'd recommend setting up a Roth IRA through Sharebuilder instead of, say, Vanguard or some of the other investment companies mentioned in this thread? I'm not exactly certain how one goes about choosing their investment company.

quote:
Originally posted by birdtrax
A roth is a good choice, you pay taxes up front but don't have to pay again. I would suggest Vanguard (lowest fees) or TROWE. Choose a target fund, the year you plan to retire or a Bond find for mega safety. I would invest monthly to get the best average cost basis.

Its quite easy to setup an account with either company and they will help you over the phone if you need help, TROWE has the better over the phone service.

Thank you for your help. At the moment, I don't have too much money to invest, but I believe I can put aside $100 or so for monthly investments. Would that be a decent amount to start off with?
Post Tue Jul 05, 2011 4:31 pm
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oldguy
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quote:
but I believe I can put aside $100 or so for monthly investments. Would that be a decent amount to start off with?


Yes, $1200/yr invested at 11%/yr for 31 yrs = $300,000, so that's a good start. As you age and get raises, you will probably increase the investment. If you triple it you will get about a million.

I would avoid the sharebuilder-type accounts, the fees are high. Eg, if the fee is $7.95 each month when you add $100, there goes 8%. So most of your 11%/yr return is gone. Conversely, the no-load companies such as Vanguard or Fidelity charge just a few cents - ie, if your return is 11%, you get to keep about 10.8%.; It makes a huge difference when compounded over 31 yrs. Very Happy
Post Tue Jul 05, 2011 4:49 pm
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RichS
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What made you decide that a Roth IRA was the best way to go???? Question
Post Tue Jul 05, 2011 4:56 pm
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financialdummy
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Thanks, this thread is really helping me understand a bit more.

Here are some more newbie questions accompanied by a Vanguard screenshot:



As you can see, there are two funds selected, 500 Index and Target Retirement 2045.

1) Would choosing two funds like this be a good way to start off (for a lack of better words) or would I be better just sticking with one?

2) If I were to invest $100/mo, does the $100 get divided evenly among the two funds or whatever amount of funds I have added?

3) 500 Index has a minimum of $3000 and the Target fund has a minimum of $1000. Does this mean I need $4000 to start?


Last edited by financialdummy on Tue Jul 05, 2011 5:06 pm; edited 3 times in total
Post Tue Jul 05, 2011 4:56 pm
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financialdummy
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quote:
Originally posted by RichS
What made you decide that a Roth IRA was the best way to go???? Question

Mostly the tax advantage and the fact that I can tap into the Roth to purchase my first home.

Oh, on that note, would anybody happen to know if the first home purchase has to be within the United States? I couldn't find any information on this.
Post Tue Jul 05, 2011 5:03 pm
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oldguy
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quote:
1) Would choosing two funds like this be a good way to start off (for a lack of better words) or would I be better just sticking with one?

2) If I were to invest $100/mo, does the $100 get divided evenly among the two funds or whatever amount of funds I have added?

3) 500 Index has a minimum of $3000 and the Target fund has a minimum of $1000. Does this mean I need $4000 to start?


1. They are essentially the same fund - so there is no point to buying both.
2. No, not evenly - you would provide the direction for how much in each fund.
3. Yes. The two funds would be separate - and you would need to 'make minimum' for each one.

The Target funds are a recent invention - so I have never had the occasion to own one - but if I were young and starting a wealth-building program that is what I would use. And I would use the 2050 - the Targets funds typically lean to the conservative side, so you can apply some 'windage' by adding 5 or 10 yrs to your real retirement date.

A couple of things for you -
1. Priority. You said "'I think I can put aside $100". If you pay your bills first, and then invest what is left at the end of the month, you will never have money. Conversely, if you invest first, and live on what is left, you will build wealth. Kinda like the guy who says 'I'm going to try to quit smoking'. You know that he is going to fail. But if he said "I am going to quit smoking' he will.
2. Retirement. IMO, avoid thinking of this as a retirement fund and think of it as your wealth building fund. "Retirement' is abstract, 35 yrs away, you might not even live that long - hard to get enthusiastic about it. Wealth building is more of a trip than a destination - and if you are good at it, a million at age 35 or 40 is life changing, adds comfort and contentment. And a few million at age 50 or 60 is nice, doesn't necessarily need to be locked up as 'retirement'.
Post Tue Jul 05, 2011 5:36 pm
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littleroc02us
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[quote="financialdummy"

1) Would choosing two funds like this be a good way to start off (for a lack of better words) or would I be better just sticking with one?

2) If I were to invest $100/mo, does the $100 get divided evenly among the two funds or whatever amount of funds I have added?

3) 500 Index has a minimum of $3000 and the Target fund has a minimum of $1000. Does this mean I need $4000 to start?[/quote]

I use Vanguard for my roth IRA investing and have learned a lot just by reading their website. I was just doing some maintenance on exchange money around into a new fund today. I just opened up a fund called the Wellington fund which is moderately risky from the Total stock market fund which is much riskier. I'll try to answer your questions:

1. I would start with one fund because to get into more you will have to come up with 4-5k.

2. If you have one fund it only goes to that one, unless your opening a new fund with the minimum requirement.
3. Yes, you could do that and it would require minimums of 1k and 3k. I would suggest you start with one and put 5k into it and later on when you contribute more then you will be able to move some money around fee free and open up more mutual funds.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Tue Jul 05, 2011 6:26 pm
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jerrykhang1
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Thanks for the plan. very informative

url deleted
Post Wed Jul 06, 2011 5:11 am
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madanjackson
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If you are young, put SP500 Index Fund shares in the Roth account, they grow with the marrket stock, they are diversified across the entire market, and their costs are low costs. And, with history as a guide, they performed better than most other choices.
Post Sat Apr 07, 2012 5:24 am
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fast
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quote:
Originally posted by madanjackson
If you are young, put SP500 Index Fund shares in the Roth account, they grow with the marrket stock, they are diversified across the entire market, and their costs are low costs. And, with history as a guide, they performed better than most other choices.
What is the point of this plagiarism?
Post Sat Apr 07, 2012 9:53 pm
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Deen888
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quote:
'I'm going to try to quit smoking'. You know that he is going to fail. But if he said "I am going to quit smoking' he will.

Quitting smoking is not so easy as it might seem, one can never say for sure if he will succeed or fail. I happily kicked the habit thanks to vape pods and naked salt hawaiian pog , just like other millions people in the world who switched from smoking to vaping.
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