noob question about Roth IRA's.

[Special K]

Originally posted by: purbeast0
okay back for another quesiton ...

i'm currently online at Vanguard and trying to setup my roth IRA, however it is asking me to choose funds now.

i really have no clue about which funds to choose or anything but I did see the STAR one is one that came recommended for people who don't know much about this.

i'm pretty young (26) and was just wondering if anyone else has any recommendations on exactly what to pick here or feedback on my selection. thanks.

There is a ton of information out there about asset allocation, and it is probably worth it to you to read it at some point. I recommend the following books:

The Boglehead's Guide to Investing
A Random Walk Down Wall Street
Mutual Funds for Dummies

and the following website:

diehards

as good resources to learn about fund choices.

That said, if you are going to invest right now, I would personally go with one of Vanguard's Target Retirement 20XX funds. Pick the one with the latest date. They will have a pretty aggressive asset allocation (i.e. will be primarily invested in stocks as opposed to bonds) but since you are young, having an aggressive portfolio is good.

I believe the Target Retirement funds have an investment minimum of $3000. If you are investing a lump sum of at least $3k, then go with that. If not, I believe the Vanguard STAR fund will let you start investing with a lower initial investment. Once your portfolio grows to $3k, you can move your money into the Target Retirement fund.

Having said that, I still think it would be a good idea to read at least one of the above books so you learn something about mutual funds, expense ratios, asset allocation, etc.

 

[purbeast0]

yea I plan on dumping more tha $3k into it right now so I think i'm going to pick the 2040 target year.

i'm a little worried though because when signing up it looks like it takes 10 days for them to verify my bank information, and i wanted to try and get the $4k in there for last years contribution before the 15th. i'm not exactly sure if i can get it in there before the 15th because of this.

but thats what i get for being a procrastinator

 

[DaveSimmons]

Originally posted by: purbeast0
so would you say those are better than the STAR one? i honestly have no clue wtf the STAR one is really about other than i saw it recommended from some good IRA link I saw, saying that the fees are waived if you deposit $1K into it and do online xfers. they state it's good for beginners.

The STAR fund has 30-40% of its assets in bond funds, only 60-70% in stocks. That will be a good fund to own when you're 60 but it's way too bond-heavy for a young investor.

 

[purbeast0]

awesome so i finally got it started

and actually it let me submit $4k for last year even though the money is not going through instantly so that's good