Need to open an IRA...

[thehstrybean]

I'm 21 years old and make maybe $16,000 a year (mainly because I'm a full-time student, but graduate in December). I finally got some money just sitting in the bank and figured it's time to open an IRA (and it was one of mint's reminders). I'm eligible for a Roth or Traditional. I understand that once I start putting money in, it can be used to grow (securities, etc). I don't quite understand these, but someone manages them, right? So is there any company I should go with over another? Just need some general advise. Thanks!

 

[nickbits]

look into vanguard. they have some target retirement funds that you just pick the year you are going ot retire and they do the work of balancing the portofolio between bonds and stocks. they also have low fees.

 

[Blieb]

Definitely do Roth.

A lot of people like Vanguard because they have a lot of super low cost index funds.

I personally use Fidelity, have had them for a long time and just never changed.

If you buy mutual funds, technically there is a "fund manager" so you don't have to worry about the day to day holdings.

 

[Pliablemoose]

Start a Roth IRA & buy a Vanguard Mutual Fund.

At your age, go for a very aggressive (high return) mutual fund, as you get older, you should take less risk with your retirement money.

I'm near 50, and am near 50% in high yield corporate bonds, and 50% in stocks. (I trade stocks almost daily.)

 

[Gunslinger08]

Is now the best time to buy in to the market, or do you think we should wait until later in the year? The market has run up a lot in the past few months and it seems like it could be ready for a pullback. I don't want to fund my IRA and then have the market dump 10 or 20%.

 

[Pliablemoose]

Originally posted by: joshsquall
Is now the best time to buy in to the market, or do you think we should wait until later in the year? The market has run up a lot in the past few months and it seems like it could be ready for a pullback. I don't want to fund my IRA and then have the market dump 10 or 20%.

Even the experts are arguing that one, it's difficult to time the market. With an actively managed Mutual Fund, someone is helping to soften the landing, if you're doing your own, you need to learn about stops, and limits if you're trading equities.

https://us.etrade.com/e/t/inve...none&rightrail=disable

 

[alrocky]

Your fear of the market retreating 10 or 20% is largely irrelevant. Back in March at the year's low, you had no idea the market would rise as it had. The market can also rise another 10%. Timing the market is a fool's game - what's important is time in the market. The $5000 invested in an IRA this year will be worth more than $5000 invested in an IRA 20 years from now.

http://www.bogleheads.org/

Books of Interest link:

The Four Pillars of Investing - Bernstein
The Bogleheads' Guide to Investing - Larimore
Why Smart People Make Big Money Mistakes - Belsky

 

[Pliablemoose]

Originally posted by: alrocky
Your fear of the market retreating 10 or 20% is largely irrelevant. Back in March at the year's low, you had no idea the market would rise as it had. The market can also rise another 10%. Timing the market is a fool's game - what's important is time in the market. The $5000 invested in an IRA this year will be worth more than $5000 invested in an IRA 20 years from now.

http://www.bogleheads.org/

Books of Interest link:

The Four Pillars of Investing - Bernstein
The Bogleheads' Guide to Investing - Larimore
Why Smart People Make Big Money Mistakes - Belsky

He's 21, add another 20 years 😀

 

[Gunslinger08]

Originally posted by: alrocky
Your fear of the market retreating 10 or 20% is largely irrelevant. Back in March at the year's low, you had no idea the market would rise as it had. The market can also rise another 10%. Timing the market is a fool's game - what's important is time in the market. The $5000 invested in an IRA this year will be worth more than $5000 invested in an IRA 20 years from now.

http://www.bogleheads.org/

Books of Interest link:

The Four Pillars of Investing - Bernstein
The Bogleheads' Guide to Investing - Larimore
Why Smart People Make Big Money Mistakes - Belsky

I'm talking about when to fund it for this year, not when to start it. That's a max of a 3 month wait. If it looks like a pullback could happen, why not wait?

 

[maziwanka]

Originally posted by: Pliablemoose
Start a Roth IRA & buy a Vanguard Mutual Fund.

At your age, go for a very aggressive (high return) mutual fund, as you get older, you should take less risk with your retirement money.

I'm near 50, and am near 50% in high yield corporate bonds, and 50% in stocks. (I trade stocks almost daily.)

nice. i wish we could, but employee policy is that we can't trade (generally)

 

[dud]

You might want to consider educating yourself BEFORE you make the next move. Example: "I'm eligible for a Roth or Traditional." You are eligible for a traditional (401K) as well as a Roth. I have both a 401K and a Roth that I contribute $4K per year.

Use the Internets to educate yourself and avoid asking for advice here. Many people will point you toward a specific company or fund. It is too early for that. You should first set goals and decide how much risk you are willing to take.

Research ...

 

[Pliablemoose]

Originally posted by: maziwanka

Originally posted by: Pliablemoose
Start a Roth IRA & buy a Vanguard Mutual Fund.

At your age, go for a very aggressive (high return) mutual fund, as you get older, you should take less risk with your retirement money.

I'm near 50, and am near 50% in high yield corporate bonds, and 50% in stocks. (I trade stocks almost daily.)

nice. i wish we could, but employee policy is that we can't trade (generally)

I've changed jobs multiple times and rolled my 401k's & 403b into a self controlled IRA through eTrade.

No more hidden fees, damn employer sponsored IRA's rape you and hide the fees behind said rape.

 

[DaveSimmons]

Don't forget to build up some savings for emergencies at ING Direct or similar. You want to keep some of your funds where you can get at them in a few days instead of weeks.

The Vanguard Target funds have low fees (a fund of index funds not actively managed) and it's made up of a bunch of good funds including US stocks, foreign stocks including emerging markets, and a little bit of bonds.

A Roth IRA at Vanguard is a good place to start. The nice thing about a Roth is that you can take out some of your original contributions without any tax penalties for a real emergency or to make a house down payment. That means you can risk putting more into the Roth than you might be willing to do with a traditional IRA where taking out any money costs you taxes and penalties.

 

[AtlantaBob]

You should also read up on the concept of dollar-cost averaging. That is, you put a fixed amount of money in each month ($416.66 in a standard year) or, in your case, ($625 / month each month until April 2010 as you can contribute to a prior year IRA until April 15 of the next year). That way, if the market shoots up between now and then, you'll at least have gotten some money in at the low cost point; on the other hand, if the market plummets, you'll be putting in some money when there are better deals on the table. Generally, this is a pretty good way to add some discipline to investing, especially if you're not the type that really focuses a lot on short term trends.

As everyone said, Vanguard is a good place to go if you want low-fixed costs, and someone else dealing with the issues of managing your money. As you learn more later, you may want to transfer the funds somewhere else. But they're a good general place to go in the beginning.

You might also want to look at the American Association of Individual Investors (http://www.aaii.com) they're pretty good about educating people about investment knowledge without trying to sell you anything.

And as DaveSimmons says, don't forget to keep some cash on hand. Good luck!

 

[Special K]

Originally posted by: joshsquall

Originally posted by: alrocky
Your fear of the market retreating 10 or 20% is largely irrelevant. Back in March at the year's low, you had no idea the market would rise as it had. The market can also rise another 10%. Timing the market is a fool's game - what's important is time in the market. The $5000 invested in an IRA this year will be worth more than $5000 invested in an IRA 20 years from now.

http://www.bogleheads.org/

Books of Interest link:

The Four Pillars of Investing - Bernstein
The Bogleheads' Guide to Investing - Larimore
Why Smart People Make Big Money Mistakes - Belsky

I'm talking about when to fund it for this year, not when to start it. That's a max of a 3 month wait. If it looks like a pullback could happen, why not wait?

Nobody has been able to successfully time the market repeatedly. It's best to just invest the money and not worry so much about the timing. What if the market rises another 10-20% while you were waiting for that pullback? In that case, you would have been better off investing now.

 

[Brainonska511]

Originally posted by: nickbits
look into vanguard. they have some target retirement funds that you just pick the year you are going ot retire and they do the work of balancing the portofolio between bonds and stocks. they also have low fees.

This.

Vanguard, Roth IRA -

I'd say pick one fund to start with this year, as you generally need $3k to open one with Vanguard. The Target Retirement funds are certainly a good starting point. You can always open it up with a 'riskier' stock fund instead, since you'll be in it long term and then open the Target Retirement fund the following year with another $3k.

And if you max out the IRA, consider just opening a non-IRA fund, it'll probably do better than just sitting around in the bank.

If you need a liquid account, Vanguard's Money Market (I think it's this one) fund allows you to write checks directly from it.

 

[Pliablemoose]

The market has been deceptively easy to play the last few months, just buy a bucket o stocks and they've all gone up.

The trick is to realize when the run up is over and the market starts to trade sideways or down.

And for god's sake, buy Apple 😀

 

[AtlantaBob]

Originally posted by: Brainonska511

Originally posted by: nickbits
look into vanguard. they have some target retirement funds that you just pick the year you are going ot retire and they do the work of balancing the portofolio between bonds and stocks. they also have low fees.

This.

Vanguard, Roth IRA -

I'd say pick one fund to start with this year, as you generally need $3k to open one with Vanguard. The Target Retirement funds are certainly a good starting point. You can always open it up with a 'riskier' stock fund instead, since you'll be in it long term and then open the Target Retirement fund the following year with another $3k.

And if you max out the IRA, consider just opening a non-IRA fund, it'll probably do better than just sitting around in the bank.

I had forgotten that (of course!) you have to have a minimum investment to open an account with Vanguard -- and with almost everyone else, too. But you can still use the dollar-cost averaging approach in subsequent deposits and in other investments.

One thing to remember, even though $5,000 seems like a lot of money now, even a 20% swing in the market will only be $1,000. Nice money, sure, but in a few years, it won't be that big of a deal. Probably better just to get started now.

 

[thehstrybean]

Thanks for the advise. I'm going to start researching. I read a few articles on IRA basics and how they work, but I needed some more specific things. More reading in the future...

 

[alrocky]

Originally posted by: joshsquall

Originally posted by: alrocky
Your fear of the market retreating 10 or 20% is largely irrelevant. Back in March at the year's low, you had no idea the market would rise as it had. The market can also rise another 10%. Timing the market is a fool's game - what's important is time in the market. The $5000 invested in an IRA this year will be worth more than $5000 invested in an IRA 20 years from now.

http://www.bogleheads.org/

Books of Interest link:

The Four Pillars of Investing - Bernstein
The Bogleheads' Guide to Investing - Larimore
Why Smart People Make Big Money Mistakes - Belsky

I'm talking about when to fund it for this year, not when to start it. That's a max of a 3 month wait. If it looks like a pullback could happen, why not wait?

The time to fund it would have been back in March. Your question as to when to fund it this year is still a question about market timing. Technically you have until April 15 2010 to fund your 2009 IRA but as a practical matter you should fund it this calendar year.

"Why not wait?" Answer this: why didn't you invest back in March? As a rule iit s impractical to try to time the market. If you had correctly thought the market had bottomed in March you would have invest then. But neither you or I knew that was the year's low. Folks were probably thinking: "Why should I invest now in March when it may drop another 10%?"

The market has had more up years than bad years - thus it is better to invest in January of any year instead of December of the same year. You are sweating the small stuff. Since time is a lever that can work towards your behalf, it is more important to invest as much as you can as soon as you can.

Please read the listed books. And ask your question at the linked site/

 

[Brainonska511]

Originally posted by: alrocky

Originally posted by: joshsquall

Originally posted by: alrocky
Your fear of the market retreating 10 or 20% is largely irrelevant. Back in March at the year's low, you had no idea the market would rise as it had. The market can also rise another 10%. Timing the market is a fool's game - what's important is time in the market. The $5000 invested in an IRA this year will be worth more than $5000 invested in an IRA 20 years from now.

http://www.bogleheads.org/

Books of Interest link:

The Four Pillars of Investing - Bernstein
The Bogleheads' Guide to Investing - Larimore
Why Smart People Make Big Money Mistakes - Belsky

I'm talking about when to fund it for this year, not when to start it. That's a max of a 3 month wait. If it looks like a pullback could happen, why not wait?

The time to fund it would have been back in March. Your question as to when to fund it this year is still a question about market timing. Technically you have until April 15 2010 to fund your 2009 IRA but as a practical matter you should fund it this calendar year.

"Why not wait?" Answer this: why didn't you invest back in March? As a rule iit s impractical to try to time the market. If you had correctly thought the market had bottomed in March you would have invest then. But neither you or I knew that was the year's low. Folks were probably thinking: "Why should I invest now in March when it may drop another 10%?"

The market has had more up years than bad years - thus it is better to invest in January of any year instead of December of the same year. You are sweating the small stuff. Since time is a lever that can work towards your behalf, it is more important to invest as much as you can as soon as you can.

Please read the listed books. And ask your question at the linked site/

It doesn't matter when he starts his Roth IRA this year - as long as he starts it. He's not going to touch it for the next 40 years, so might as well just open one as soon as possible. Long term growth will basically negate most if not all any short term loss he might experience.

 

[Terabyte]

Sorry for the thread hijack, but what's a good site for learning about the basics of investing/retirement plans? I don't have much $$ to invest with, but I do have a retirement plan from the University of California (UC) through Fidelity net benefits (full time student / working on campus).

When I log in to Fidelity, I see three plans:

UC 403(B) PLAN
UC 457(B) PLAN
UC DCP (Defined Contribution Plan)

To be honest, I have no idea what these plans are...🙁. The first two plans have $0 and the last one has ~$50. Should I be contributing some amount of $ from my pay check?

 

[alrocky]

Originally posted by: Brainonska511

A) It doesn't matter when he starts his Roth IRA this year...

B) ... so might as well just open one as soon as possible.

C) Long term growth will basically negate most if not all any short term loss he might experience.

First two conflict. Agree with 2 out of 3 since he's "sweating the small stuff."

Should I be contributing some amount of $ from my pay check?

Yes, as much as you afford. More now = more at retirement.

 

[Brainonska511]

Originally posted by: alrocky

Originally posted by: Brainonska511

A) It doesn't matter when he starts his Roth IRA this year...

B) ... so might as well just open one as soon as possible.

C) Long term growth will basically negate most if not all any short term loss he might experience.

First two conflict. Agree with 2 out of 3 since he's "sweating the small stuff."

Should I be contributing some amount of $ from my pay check?

Yes, as much as you afford. More now = more at retirement.

Not quite. The first point (A) meant that he shouldn't be worrying about everyone that was like "you should have opened it 6 months ago". The second point, (B), is in reference to just doing it before tax time, so you get that extra year of contributions.

 

[imported_Lothar]

Originally posted by: joshsquall
Is now the best time to buy in to the market, or do you think we should wait until later in the year? The market has run up a lot in the past few months and it seems like it could be ready for a pullback. I don't want to fund my IRA and then have the market dump 10 or 20%.

You can fund it and decide to buy something later.
When I funded my IRA last year, I didn't buy anything immediately.

Is there some rule stating that if you fund an IRA, you have to buy a security immediately? 😕
If so, I suggest you change your brokerage account.