IRA investment question

[LuckyTaxi]

I'm trying to narrow down the broker I would like to use but have a question in the meantime. Is it like investing in a 401k? Right now I put $200/month into my 401k. That $200 is allocated between 4 different funds. Is that how it is with IRAs? Or am I getting charged these transaction fee PER transaction.

So, let's take the $200 and I want to "diversify" between 4 funds in my IRA, would that be $12.95/fund (t-rowe price). Hence, my transaction cost PER MONTH would be $51.80?

 

[Amused]

I don't know if investing in the Irish Republican Army is a wise move at this time.

 

[glenn1]

Originally posted by: LuckyTaxi
I'm trying to narrow down the broker I would like to use but have a question in the meantime. Is it like investing in a 401k? Right now I put $200/month into my 401k. That $200 is allocated between 4 different funds. Is that how it is with IRAs? Or am I getting charged these transaction fee PER transaction.

So, let's take the $200 and I want to "diversify" between 4 funds in my IRA, would that be $12.95/fund (t-rowe price). Hence, my transaction cost PER MONTH would be $51.80?

I'm not going to go look up Rowe's schedule of fees, but for sake of argument we'll go with the $12.95/transaction fee. In that case, rather than splitting your contribution between 4 funds each month, simply invest the monthly total into a single fund on a rotating basis. You'll still achieve dollar-cost averaging, but minimize transaction fees.

BTW, I would also pull my money out of a financial services firm which charged a transaction fee on purchase of a no-load fund.

 

[LuckyTaxi]

Originally posted by: glenn1

Originally posted by: LuckyTaxi
I'm trying to narrow down the broker I would like to use but have a question in the meantime. Is it like investing in a 401k? Right now I put $200/month into my 401k. That $200 is allocated between 4 different funds. Is that how it is with IRAs? Or am I getting charged these transaction fee PER transaction.

So, let's take the $200 and I want to "diversify" between 4 funds in my IRA, would that be $12.95/fund (t-rowe price). Hence, my transaction cost PER MONTH would be $51.80?

I'm not going to go look up Rowe's schedule of fees, but for sake of argument we'll go with the $12.95/transaction fee. In that case, rather than splitting your contribution between 4 funds each month, simply invest the monthly total into a single fund on a rotating basis. You'll still achieve dollar-cost averaging, but minimize transaction fees.

BTW, I would also pull my money out of a financial services firm which charged a transaction fee on purchase of a no-load fund.

Doesn't most places charge a fee? I thought the no-load fund just meant no fees on the fund, like yearly maintenance fees or whatever it's for.

 

[SoulAssassin]

At $200/mo you are well under the maximum contributions for a 401k, are you even maximizing your company match? Look there before you start the IRA.

1. 401k up to the match
2. Max out roth
3. Max out 401k
4. Taxable investing

 

[LuckyTaxi]

Originally posted by: SoulAssassin
At $200/mo you are well under the maximum contributions for a 401k, are you even maximizing your company match? Look there before you start the IRA.

1. 401k up to the match
2. Max out roth
3. Max out 401k
4. Taxable investing

My funds in my 401k are horrible. Not much choices to choose from. I'm @ 4% ($100) a paycheck.

 

[DaveSimmons]

vanguard.com - Target <year> fund ("Target 2050") gives you shares in a full set of Vanguard US and foreign stock index mutual funds, plus a bond fund. (Higher year numbers = less bonds.). Instant full market diversification using low-expense index funds.

Choose all-electronic delivery to have most "account maintenance" fees waived. The monthly transaction fee is _ $0 _ if you set up an automatic investment plan, or otherwise you need $3,000(?) to open and $1,500(?) to make non-automatic share purchases.

If not vanguard, Scottrade and buy ETFs (exhange traded funds) but you'll pay transaction fees and won't get as much diversity.

 

[SoulAssassin]

But you didn't answer my question, are you maximizing your company match?

 

[LuckyTaxi]

Only thing holding me back from VG is the $3k to open. I can afford $1k but damn $3k?
I have ETFs through sharebuilder but I have to start thinking about the tax liability with ETFs if I choose to take them out.

 

[Capt Caveman]

Almost all IRA funds will waive maintenance/transaction fees if you set-up an automatic monthly deposit.

 

[imported_Lothar]

Originally posted by: LuckyTaxi
Only thing holding me back from VG is the $3k to open. I can afford $1k but damn $3k?
I have ETFs through sharebuilder but I have to start thinking about the tax liability with ETFs if I choose to take them out.

You have till April 15th to contribute an IRA for 2007 ($4,000 maximum).
Vanguard has the monthly investment plan available.

My advice:
Put ALL you can afford for 2007 IRA now. The monthly installment plan will be useless for 2007 by April 15th.
A monthly installment plan for your 2008 IRA contribution won't be useless since you still have more than 12 months to contribute the $5000 maximum.