I am looking for info on roth IRA's

[Guest wanahave$]

I recently opened a Roth IRA with tdwaterhouse and my inital contribution was only $100 I know thats very little to put into a roth ira but I plan on putting atleast 100 in per month is this a good plan or should I have put more money in at the beggining or does it even really matter. Also i have read that you can just leave the money alone or invest it into different things. What kinda of interest do you make on it if it just sits there and is not invested into stocks or funds? Sorry for the questions I know they seem dumb but I think they are things I need to know. Thanks in advance

[Guest mlee]

The amount or rate of contribution is really entirely up to you and your comfort level - financially. That said, keep in mind the yearly contribution limits. Also, in regards to investments, that's entirely up to you in a brokerage Roth IRA and the information on whether the cash earns interest or not should be available from your broker - TD Waterhouse. One final note...$100 may seem small but its still a start and its good that you've done so.

[Guest wanahave$]

Thank you for the reply. I am trying to find out as much info as I can on tdwaterhouse.com but i dont think the site is very user friendly

[John G]

Yes, $100 is a small amount, but good for you for getting started.

You can contribute in a variety of ways: single lump, monthly, or periodic payments. It is totally up to you, subject to your qualification in any year and the maximum amounts. (Contribution decisions can be changed over time. You do not have to make the same contributions each year.)

Contributing a specific amount each month has some advantages. Some custodians will waive the annual fees if you adopt an automatic program. This approach is often called "dollar cost averaging" because you are buying more of your investment when prices are down.

It is critical that you put your IRA dollars to work and get them growing. Your goal should be to grow your funds faster than the rate of inflation erodes their buying power.

Some of the common investment options include: stocks, CDs, bonds, and mutual funds. Each of these catagories have different risks and likely results. Anything that is close to "risk free" will typically give you a crappy return. Over the long haul (many years), stocks (or mutual funds based upon stocks) will generally yield a higher return.

Since you are just getting started, I would suggest you consider a broadly based stock mutual fund, perhaps a low cost stock index fund. TD Waterhouse has many options to consider - if you have trouble with their extensive web site, give them a call. You are probably looking for one mutual fund that will be just fine for many years. Consumer Reports (March issue every year), Kiplinger Financial magazine, Worth and Money all have articles on mutual funds that may aide your choice.

One problem you are likely to run into initially is that you only have $100 on deposit. Some funds require $500, $1000 or higher for the initial investment. Keep making contributions and when you reach that level you can make your first investment.

[Guest wanahave$]

Thank you for the information. Is there one mutual Fund out there you would say is better then the others? and you are right about the amount I must have in before I move the money around and that amount for tdwaterhouse is $1,000. Just one more question...what does the average money market account yield? Thanks again

[John G]

You need to understand that no one can tell you that one mutual fund will perform better than others... frankly that is not the question you should ask. What you are looking for is a broadly based (not sector specific, or company size, or value/growth, or international) fund that will give you reasonable performance over a number of years. You only need one such fund for perhaps the next 10 years as you slowly build your assets. Having two eventually is fine, but initially there is no need.

I suggest you narrow the field using the following: only NO LOAD funds (no commissions), must have been in existance 10 years, very broad stock coverage, and annual expenses below 1%... preferably way below 1%. You might want to look at the various INDEX funds available through TD. Index funds are computer managed (rather than actively managed by analysts) portfolios that often have very low expenses (under .25%) and will mimic market performance. Vanguard more or less created these types of mutual funds, although many are now offering something similiar. I am not sure if the versions that TD offers will be as attractive as some of the options you have if you make a direct purchase.... you need to read the summaries of a few.

Money market accounts? Right now they pay very little ~ a few percent at best. If you want to have your retirement assets grow, you need to lean more towards stock mutual funds. While there are no specific performance guarentees or "insurance", over a long period of time you should do much better than any IOU type investments.