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Sorry it took me so long...I would not limit myself to large growth companies (in fact, I'd be focusing more on small-caps). As retirement (and then inevitable death) starts to approach, I'd shift more and more of my assets from small-cap value and growth to mid-cap and large-cap value and growth, and then to bonds. However, as long as the time-horizon for the money you're investing is far off, your best results will most likely come from small-caps (note, "value" and "growth" are not mutually exclusive terms...the best individual stocks would be those that are both selling at a significant discount to their intrinsic value and offer enormous growth potential, backed by excellent leadership....however, there are most likely very few such companies). I'd suggest just looking through the profiles of all of these and seeing which one best suits your needs. Take a look at things like expense ratio, front- and back-end load, and manager tenure. I would also suggest taking a look at Fidelity Select Electronics and Fidelity New Markets Income; Low Priced Stock is also an excellent fund, run by the same manager for many years. All are volatile, but if you're in it for the long haul, they should prove rewarding. For asset-type diverisfication, you may want to consider Fidelity Select Gold and Fidelity Real Estate Investment Portfolio (the performance of Real Estate has no relation to that of the stock market). Select Gold is approximately twice as volatile as the S&P 500, because it has two volatility factors: the stock, and the gold. Gold is an excellent hedge against against the inflation of government fiat money (the amount of gold being taken out of the money supply, and put into things like circuits and jewelery, is about the same as the amount of gold being mined). By investing in gold-companies, you also can experience some growth. Investments in gold companies are usually good bear-market performers, while so-so in the bull market. Real Estate is also good because it has no correlation to the stock-market. However, this is just a quick overview, which is most likely not tailored to your needs. If you want to determine what funds are best for you, I'd suggest you: 1. Go to Fidelity.com. 2. Click on Customer Service. 3. Click on Contact Us 4. Click on Chat With a Live Rep. 5. Select Investing with Fidelity, then click Begin Chat 6. Type in the requested information and click Connect. You can then talk to a live rep and get some advice that may be more personalized to you. (you can engage in real-time dialogue) In regards to your Roth and 401k, the same rule still applies. These tax-advantaged plans will benefit greatly from large amounts of growth. If you're going to diversity among different funds, the Roth will benefit more than the 401k/403b from the very aggressive funds (e.g., Select Electronics, Low Priced Stock), so put those in your Roth, and the "less" aggressive funds (e.g., New Markets Income) in your 401k/403b. (note, these are all aggressive investments, nonetheless). I should also warn you that you should be prepared for serious short-term volaitlity. Select Electronics has been an excellent mutual fund for those who have stayed with it for many years, and haven't tried to hop in and out. For example, in the quarter of Sept 30, 2001 (a 3-month period), the fund lost 27% of it's value. Would you be prepared for that kind of volaitlity? From 1994 to 2000, $10k would have grown to $153k...but then from 2000 until half-way through 2002, $153k would have shrank to around $20k. Subsequently, until the present, it grew back to around $66k. That's a lot of volatility. Something you should aks yourself when you invest in any fund is would you stick with the fund even it started on one of those sickening downturns now? Those who try fund hopping will usually end up buying into a fund right when it's at it's at it's high-point and about to plummet, and selling out of it before it recovers.

I believe that if you want to take a tax-loss on your Roth IRA's losses, you would need to close your Roth IRA account. However, this is not adviseable, as you would face the 10% early-withdrawal penalty (which would probably nullify the benefit of any deduction for a capital loss). Furthermore, even if the loss would not be offset by the 10% penalty, that's still money that is not not allowed to grow tax-free. You can put the money back in a Roth IRA, but then it reduces the amount you can contribute this year by that value. This is a retirement investment vehicle...you should be in it for the long-haul (until you're 59.5 or at least 10 years from now, whichever is longer). If you're not willing to commit the money for at least that long, then you should question your decision to place it in a Roth IRA in the first place.

According to this link, Health Savings Accounts can be included in Cafeteria Plans.

Your time horizon plays an important role because the longer it is, the more aggressive your investments can be with less long-term risk, as illustrated by the chart I linked to. For time-horizons of greater than 12 years, aggressive growth stocks (small-caps) provide the most growth at the lowest risk (due to the risk of inflation). If you're 25, then you're time horizon is 35-75 years (presuming you retire at 60 and die at 100, you will need your first distribution at 60 and your last at 100). Thus, in reality, you actually have 40 different time-horizons for each year of retirement (your first time horizon is 35 years when you're 60, your second 36 years when you're 61, and so-on and so-forth). Right now, that doesn't matter, because aggressive growth is your best option for time-frames greater than 12 years; however, it will start to matter when some of the time-horizons start to be less than 12 years away. If you don't know your risk tolerance, here's a rough guide. If you're uncomfortable with sustaining losses, or have a strong pereference for a predictable income stream, you have a low risk tolerance. If you are willing to ride through the ups and downs of the market in order to build up funds at a faster rate, then you have a high risk tolerance. In between is medium, which is where most people are (if you still don't know, assume you are medium). For individuals as far away from retirement as you and myself (I'm 22), you can afford to invest in more volatile investments that offer the possibility of much greater long-term returns (e.g., small-cap index, value small-cap index, growth small-cap index, aggressive growth fund). As retirement approaches (less than 12 years) you should start shifting some of your assets from more aggressive to less aggressive investments, as indicated by the chart. This will be a gradual gradiated process. Btw, I'm of the opinion that your most aggressive investments should be in tax-advantaged plans, like a Roth IRA, Traditional IRA, or 401k, because they benefit the most from those tax-advantages; and that your more conservative investments should be outside of these tax-advantaged plans. You may also want to look into Health Savings Accounts. If you want some sources of information, here are some good websites: Quicken.com The Motley Fool RicEdelman.com: Your Financial Planner (*note: Ric's advice is somewhat "off" compared to that of others, but it has merits in its own frame of reference; you should always look at something from different pov's) SuzeOrman.com (pretty well-known) American Association of Individual Investors If you want to get some books, here's some that I've found useful: Successful Investing with Fidelity Funds, 3rd Ed by Jack Bowers. Ordinary People, Extraordinary Wealth by Ric Edelman The Truth About Money by Ric Edelman The New Rules of Money by Ric Edelman The Laws of Money, The Lessons of Life by Suze Orman 9 Steps to Financial Freedom by Suze Orman The Road to Wealth by Suze Orman (an excellent "FAQ" covering all areas of finance) One Up On Wall Street by Peter Lynch Learn to Earn by Peter Lynch The Intelligent Investor by Benjamin Graham (this is serious reading) Security Analysis by Benjamin Graham and David Dodd. This is very heavy reading. Common Stocks and Uncommon Profits and Other Writings by Phillip Fisher. If you read the work of Orman and Edelman, you will notice that they conflict on a lot of points. This is what you will find as you read more and more. There are multiple ways to view any given situation (lateral thinking); you have to decide which one has the most merit for you, based off of (what should be) substantial knowledge. If you aren't interested in investing in stocks yourself, you can skip the books by Peter Lynch, Phillip Fisher, and Benjamin Graham, though they may still be useful.

Regarding the cost of a Fidelity Roth IRA, I'm not sure. I think it was $30 a year for Roth IRA accounts under a certain value. However, according to a Fidelity representative who I talked to online: With regards to what Fidelity fund is best to invest in, it depends on several factors: Your time horizon in years. Remember that for retirement, your time-horizon will not be one specific point, but rather a blend. E.g., if you're 35 now, and want to retire at 65, then your time horizon is a blend of 30 to 65 years (a 35-year period time-horizon) covering distributions to you from when you're 65 to 100. People are living longer these days; you should plan on, and aim for, living 100 year or more, not just health-wise and emotion-wise but also financial-wise. How much money you can invest initially lump-sum and how much on a yearly basis How much money you will need at the end of your time horizon and during distributions. Your risk tolerance. Retirement is not a "fixed purchase" like buying a car or a house. It is something that you will be taking distributions on for a long long long time, hopefully until you're 100 or older. You may want to take a look at this chart of optimal investments for those with a medium tolerance of risk over various time-periods. It is compensated for inflation; the best investment class for each time-horizon is shaded in black. As for determining which specific Fidelity fund is best for you, Fidelity provides a convenient search-tool for it's funds. Follow these steps: 1. Go to Fidelity.com. 2. Click on Products. 3. Click on Mutual Funds. 4. Click on Start ujnder Research Funds on the right side of the page. 5. Click on Advanced Search. 6. Check Show Only Open Funds and Show Only Fidelity Funds. 7. Select the other desired parameters of your mutual fund. I would select stock funds with an expense ratio of less than 1.50% (there are many Fidelity funds that are barely over 1%, at 1.01% or so, which you don't want to exclude), Manager Tenure greater than 10 years, and 10 year growth greater than 10%.

Not sure. What is a cafeteria plan?

Off hand, I'd say a Roth. However, alot of it depends on your tax-situation, how much money you have to roll over, and how far off your time-horizon is. The longer you plan to leave your money there, the better a Roth is compared to a Traditional. To avoid a possibly enormous tax-burden, you may want to roll over to a Traditional, then slowly convert portions of it to a Roth. Depending on your debt-sitution, you should also consider protection from creditors. Roth IRA's aren't protected from creditor's in all States, so you should find out if they are in your State, if you are in a bad debt situation. If you want more specific advice, you should post a summary of your financial situation, including the amount of money, if debt-liability is a consideration, your time-horizon, and your tax-bracket. PS: Your time-horizon isn't just from now till retirement, since you aren't going to just withdraw all of your money once you hit 60. Presumeably, you will keep most of it invested, taking out what you need on a yearly basis and leaving the rest to grow.

So, in the future, you might want to wait until near the end of the year before your contribute, if that's a concern (though you then forfeit the advantages of dollar-cost averaging).

We will now have an opportunity to save for medical expenses in a completely tax-free manner. Contributions to the Health Savings Account will be tax-deductable up to $2,250 per individuals or $4,500 per family. [unfortunately, the HSA is the only good part of the new Medicare bill, which (big surprise) greatly increases government-spending.] If you want more information on HSA's, MSA Bank's website provides an excellent resource center on HSA's -- with the latest news, and a summary of HSA's. If you just want the low-down on HSA's, this summary provides a quick chart comparing them to MSA's and enumerating their features. HSA's should provide an excellent way to save for possible medical expenses, and should provide a contingency plan -- if not another plan entirely -- to save for retirement.

I'm very pleased that we will now have an opportunity to save for medical expenses in a completely tax-free manner. Contributions to the Health Savings Account will be tax-deductable up to $2,250 per individuals or $4,500 per family. [unfortunately, the HSA is the only good part of the new Medicare bill, which (big surprise) greatly increases government-spending.] If you want more information on HSA's, MSA Bank's website provides an excellent resource center on HSA's -- with the latest news, and a summary of HSA's. If you just want the low-down on HSA's, this summary provides a quick chart comparing them to MSA's and enumerating their features. HSA's should provide an excellent way to save for possible medical expenses, and should provide a contingency plan -- if not another plan entirely -- to save for retirement.

I'd suggest you look at Vanguard and Fidelity funds. Vanguard offers the lowest expense, Fidelity offers the greatest variety of choices and relatively low expenses as well. As to what kind of funds you want to invest in, I'd suggest all growth or aggressive growth stock funds if you're investing for retirement. However, you should be prepared for short-term volatility (namely, market crashes), and should be prepared to stick to your guns during that time. If you have a lump sum of money, I would recommend investing it all at once immediately, accross several funds. If you have a regular income, I would recommend using dollar cost averaging into an aggressive growth fund. Again, you should be prepared for real market volatility. During the Great Depression, the stock-market plummetted to half of it's value in a very short period of time. That's the overall stock-market -- many stocks, of course, did worse. You should be prepared for the possibility that -- for example -- your investment will lose 50% of it's value or more in the short-term. If it's relative index and other funds of the same type are also doing poorly, you should be prepared to stick to your guns. Also, you should really be prepared to stand outside of the market. Right now, for you, you probably don't know how much money you're going to need for retirement, so you should probably invest aggressively. However, as time progresses, you may start to know how much money you'll need to meet your goals, retirement and otherwise. Thus, you should figure out your own Individual Investor Index (I^3) for the rate of return you need to achieve your goals. If you're investments are meeting that rate of return on average over many years (expect off years), then you should be happy.

The biggest, most reliable, and best-rated mutual fund families are: Fidelity TIAA-CREF T. Rowe Price Vanguard It simplifies things somewhat if you stick within the same fund family. Fidelity is a good choice for a one-stop financial keeper, because of the huge variety of what it offers. It also allows you to invest in other fund families through its fund family network. You can invest in many other non-Fidelity fund families through Fidelity without an additional fee from Fidelity. You will want to consider the cost of maintaining a Roth IRA, mutual fund expense ratios and costs, long-term performance, competence and history of fund managers, and so-on and so-forth in deciding. Vanguard, though giving less choice thatn Fidelity, offers lower expenses (Fidelity's expenses are still low, by industry standards). There are some benefits to having accounts in more than one fund family. For one thing, you get advice from both investment companies.

BigBoi1881, You should not be looking at sector-specific funds as a new investor. I believe that Vanguard hadn't even offered them for some time, under the view that they are speculative. Aside from that, new investors are unlikely to be able to withstand the extremely turbulent nature of sector funds. For example, as my link shows, the Select Electronics fund, which has been considerably more volatile than the Nasdaq, lost approximately 77% of it's value from August 2000 to August 2002. I only mentioned sector-specific funds as an example of the vast array of choices that Fidelity offers (it is unlikely that many 401(k) or 403(b) plans will even give you the option of investing sector-specifically). When you are considering a fund, there are several things you should consider. You should always invest with the presumption that the next Great Depression is about to start tomorrow. You should be comfortable with the possibility that over the short-term, your portfolio may lose a significant portion of its value. When looking at a specific fund, you should feel comfortable with the worst performance it has turned in over a year or quarter (extrapolated to a year). If you are investing in a 100% Small Stocks Index fund, you should feel comfortable accepting a worst-case scenario of losing 49.6% of the value of your portfolio. That's the worst showing the Small-Cap stocks have ever had (probably during the Great Depression). Over 5 years, the worst-case scenario was a loss of 61% of the value of your portfolio. . If you are investing in the S&P 500, you should be willing to accept a worst-case scenario over 1 year of losing 45.5% of your portfolio value. And so-on and so-forth. The important thing to note is that over very long periods of time, more aggressive investments are actually less risky than less aggressive investments. Quoting from Successful Investing with Fidelity Funds The table that the author provides is very useful for getting a gauge of the worst and best-case scenarios to expect. I've replicated it on my website. After-Inflation Growth of $1000 For Five Asset Allocation Classes, Tested Over 50 Years The shaded cells indicate the asset allocation the author suggests for the indicated time-frame. Regarding the $3,000 dollars cap on Roth IRA investments, no there's no way that you can invest more in a Roth IRA currently. The limit is scheduled to increase, however. Furthermore, the Lifetime Savings Accounts and Retirement Savings Accounts being pushed by the President would allow you to put away $7,500 in a Retirement Savings Account (would function like a Roth IRA, but available to all) and $7,500 in a Lifetime Savings account (would function like a Roth IRA, but available to all at any time, without taxes or penalty on withdrawal at any time). You can write your Congressman and Senators to support this legislation, and other legislation that offers similar tax-savings vehicles (like the Health Savings and Security Accounts). In the meantime, you should max out your employers contributiosn to your 401(k). If available, you may want to consider an MSA. If not, you may want to take a hard look at FSA's (not as good). Regarding the ability to change funds, you can pretty much change funds within the same fund-family whenever you want, though penalties imposed by the fund family (e.g., Vanguard, Fidelity) may apply if you bandwagon. You should decide what kind of asset allocation you want to invest in for retirement, given estimate time-horizon to retirement, risk-tolerance, and need for growth. If you're going to retire in 12 years or more (which should be the case, as you're 22), I'd recommend an aggressive asset allocation, because time-frames this long, aggressive investments are actually less risky than less aggressive ones. For example, over the worst 12-year period, Small Stocks gain $80 on a $1,000 dollar investment. Over the wrost 12-year period, the S&P 500 lost $252. Of course, the scenarios I show don't extrapolate beyond 12 years, but it's reasonable to believe that the worst-case scenarios will continue being better for aggressive investments. Of course, if you can't stomach the volatility over 1 year, it's pointless to talk about the benefits (in terms of reduced risk, and increased possibility for profit) over many years. It's easy to look at data showing small stocks losing 50% of their value over 1 year in the worst case, but holding steady over 12 years in the worst case. It's an entirely different (not so easy) thing to actually lose 50% of your investment over 1 year. In any case, you have to decide what your asset allocation is going to be. You should be comfortable with the worst-case scenarios in all time-frames, and willing to continue investing in it (dollar cost averaging into it) over the worst periods, because those are actually the best time to invest (you buy more shares at a cheaper price). Once you decide upon an asset allocation, you should stick to it unless your situation changes (e.g., obviously, when you start approaching your retirement year, you may want to rebalance your investments). You should review your funds' performance periodically, and should pretty much ignore short-term fluctuations. I would suggest doing an annual review of your mutual funds, and deciding if you want to stay invested in them. If you choose not to, you should not adjust your asset allocations. For example, if you're 50% small-caps, 50% bonds, and you're unhappy with your small-cap mutual fund, you should not switch from a small-cap mutual fund to a large-cap. You should switch from the small-cap your in to another that you're more comfortable with. Things to consider should be expense ratio, minimum initial investment, any penalties upon sale of fund, fund performance relative to the applicable index, manager tenure, mutual fund family, and how much you trust the manager. When you invest in a managed mutual fund, you are essentially investing in the manager's ability (or lack thereof) to outperform his index by more than the expense ratio over the desired time-frame. If you don't have confidence that the manager can do that, you should invest in an index fund. One nice thing about index-funds is that you don't have to worry about managers, since there are no managers who make any decisions. If you want an index fund, Vanguard should be your first stopping place. Only invest elsewhere if Vanguard doesn't have the index fund you want (e.g,. if you want a Nasdaq Index fund, you'll have to go elsewhere). If you choose to invest in index funds, you may have less need to periodically evaluate them, since there's less to evaluate (you're literally investing in an asset class, be it large cap value or small cap growth).

Imo, there are only a couple of mutual fund families that you should consider putting your money into. These are fund families that have demonstrated good performance, integrity, relatively low expenses, and stability: Fidelity TIAA-CREF T. Rowe Price Vanguard You are unlikely to be caught up in some kind of mutual-fund scandal if you invest in these companies. When it comes to options, a wide breadth of services, and excellent web-support, you will be hard-pressed to beat Fidelity. It is like a wholesale store for mutual funds. If there's a type of investment your interested in, Fidelity probably has a mutual fund for it. Their Select Portfolios, for example, encompass specific sectors (e.g., Select Electronics has a large focus on superconductors, and tends to be superior in bull markets; Select Gold focuses on gold, and has traditionally been stagnant in bull-markets, and sky-rocketing in bear-markets). When it comes to choosing between a moderate amount of good index funds, Vanguard can't be beat. I don't even know why other companies bother offering Index Funds, since Vanguard's index funds, to my knowledge, have always had the lowest expense ratios. Vanguard is going to be introducing some sector index funds, which will increase your options. If your investing money in a Roth IRA, it should be for the long-term -- retirement. This is money that you shouldn't be touching for at least 40 years, if you're 22 now. Thus, you should completely ignore the short-term. It is interesting to note that investments you would normally call "risky" are actually safer in the long-run than those you would normally call "conservative". From Successful Investing with Fidelity Funds, by Jack Bowers, the risk-break-downs over a 12-year period, assuming you initially invested $1,000 and compensating for inflation. This data was tested over 50 years: Aggressive Growth: 100% Small Stocks Best case: $13,424 Average: $2,972 Worst Case: $1,080 Growth: 100% S&P 500 Best Case: $6,749 Average: $2,308 Worst Case: $748 Growth & Income: 60% S&P 500, 40% Int. Gov't Bonds Best Case: $3,662 Average: $1,798 Worst Case: $819 Income-Oriented: 50% Int. Gov't Bond, 20% Corp LT Bond, 30% S&P 500 Best Case: $3,544 Average: $1,447 Worst Case: $782 Money Market: Best Case: $1,516 Average: $1,039 Worst Case: $564 Traditionally, we say that the money market is a "safe investment'. However, over a 12-year period, investing in a small-stocks index would be safter. This is because of the effects of inflation. For a rough guide, Bowers suggests the following investments for various time-horizons, assuming a moderate tolerance for risk: 12yr or more: Aggressive Growth 8yr: Growth 5yr: Growth & Income 3yr: Income-Oriented 1yr: Money Market That is, if you're going not going to need your money for greater than 3 but less than 5 yrs, you should consider income-orientation. If it's 8 <= time horizon < 12 years, then you should consider growth. The important thing is not to be scared off by short-term fluxuations, especially if you invest for the long haul. You should be prepared for drops in portfolio value of perhaps 50% in bear-markets. Rather than dreading this, consider it an opportunity to continue using dollar-cost averaging, and buying the same mutual fund at a cheaper price.

MSAs require that you be "self-employed" to use them, but what does that mean? If you work for a company or university as your job, and are also self-employed in a second occupation, are you "self-employed" and elegible for an MSA?

Is it possible to incorporate your own investment/brokerage company, in which you would open a Roth IRA account?

As I said, there is nothing strictly scandelous about this plan, aside from perhaps the $100,000 dollar price of it, which will nullify the benefits associated with it. That is particular to the company offering to provide such a scheme, not to the scheme itself. Regarding the usefulness of the particular non-PT transactions that mzbozek suggests: This is not particularly novel, not useful. What this is saying is that someone who works at IBM as a programmer can buy IBM stock within his Roth IRA. This is done all the time with 401(k)s. There are no astounding benefits to this, since the vast majority of individuals who would do this have no control over how much money the company commits to dividents vs. employees salaries. The following situations, however, could be useful: These types of actions could be useful if you can control the company you are purchasing stock from to some extent. For example, if you're using your Roth IRA to buy stocks of an IPO where you are the incorporator. If you also are running that corporation, then you can decide what percentage of its profits go to your salary vs. future investment in the company and dividents. If you pay yourself the bare minimum that is acceptable for you to live off of, then you will benefit greatly from the large amount of reinvestment in the company, which will be tax-free under your Roth. Of course, that assumes that you can actually successfully harness that reinvestment to grow your company, thus increase it's value (or increase your dividents).

I'm working for the University of Rochester. I contribute the max to my 403(b) plan each year, and am wondering how I can roll over my money into a Traditional IRA, so that I can then convert it to the Roth. I was told that I can do a 90-24 "asset transfer". Is it possible for me to do this, irrelevant of what my employer says? I like the Roth IRA tax benefit better than that offered by a 403(b), because over the long-term, the growth on my money will make it worth-while to pay the taxes up-front. Does anyone have any suggestions?

Any specifics? The prohibited transaction rules for Roth IRA's specifically, or just general prohibited transactions? SOmething that would be mentioned in All you ever wanted to know about Roth IRAs but were afraid to ask?

This is a theoretical question. The way a Roth IRA works is that initial contributions are taxed, but any growth of those contributions, no matter how great, is completely tax-free. So, could someone set up a Roth IRA, and invest in his own company, of which he has complete shareholder ownership, and then place the profits generated in the Roth IRA, by passing off cash as dividents on the stock? (of course, this assumes that one could run a profitable company, which most people can't do).

The advantages mentioned of 401k's are true. You may get professional diversification advice (note that diversification isn't necessarily a good thing). However, in many cases, the tax-free growth of a Roth IRA is advantageous over the tax-deducted tax-deferred growth of the 401k. This becomes more and more the case as your time-frame increases. True, you can take out a loan against your 401k, and then pay yourself back. But with a Roth IRA, you can take out the totality of your initial contributions, without paying interest (even if it is to yourself). Also, remember, that you can apply any "professional advice" you get from your 401k professionals to your Roth IRA. If professional advice is offered on a 401k for free, set one up with the minimum funds, to get that advice; then apply it to all your investments.

If you're company is not matching your 401k contributions, you almost certainly shouldn't be investing in the 401k. You should either be investing in a Traditional or Roth IRA, if you can. If contributions aren't matched, a Traditional IRA is better than a 401k or 403b because you have better investment flexibility. A Roth IRA is better yet, because your money can grow tax-free. Tax-free growth will almost certainly be better than tax-deferred growth, even if your initial contributions are tax-deductable, and this advantage will increase with time and with greater growth. Also, with a RothIRA, you can take out your initial contributions anytime you want, tax-free. Another nifty advantage is that your heirs inherit the Roth IRA tax-free. The other nice thing about a Roth IRA is that -- under certain circumstances, which I don't think you meet, unfortuantely -- you can get a tax-credit for a RothIRA contribution up to half the contribution amount.

John makes some good points, which I did not mention. The market-value of your bond does decline as interest rates move up (because you need to offer it a discount to make it competitive with the higher-yielding bonds). You should consider if you'll be better off dropping your old bond and getting a new one at a better interest rate. In some cases you will, in others you won't. I think it's important for each individual investor to be "ok" with the fact that there are some people out there making more money than they are. You should want to make as much money (in the long-term average) as you need for your goals, and shouldn't worry much about what other people are making. The bond-fund advantages John mentions are also worth considering. If those advantages are more important to you than the advantage of the stability of a bond, then you may want to consider a bond-fund. Interest rates are the important thing to consider when talking about bonds. You're best off when you invest in a bond when interest rates are high, and if interest rates subsequently drop (make sure there are no call options). In the unhampered free market, interest rates are solely a function of consumer time-preference, which will vary. If consumers have a very high time prefernece (e.g., they want money *now*), then interest rates will be higher; if they have lower time-preferences, then interest rates will be lower. In the current situation, the government intervenes and tampers with interest rates, which unfortunately complicates things. What I think you should do is definately get out of a money-market fund. Even I-Bonds would be better than a money-market fund, but you still should be getting something with better yield than that. When your money is in a money-market, you are actually losing money to inflation (or rather, to the government, which benefits from inflation). What I'd suggest you do is find out as much as you can about various investment options, and see what you feel comfortable with. You should also be at peace with the business-cycle. Every so many years, there is going to be a depression (I don't use euphemisms, so I call it a depression, not a recession). There is no doubt about it. So long as there is inflation, there will be such business cycles, thus depressions. You should definately ignore those who babble about how we're entering a new era of uninterrupted boom. The more the market price rises -- and the more cocky the market's confidence gets -- the more justified you are in worrying. And the more the market goes down, the more everyone else is pessimistic and scared, the more confidence you should have.

Well, I don't know about your time-horizon, but if you're putting money in a Roth IRA, presumably your time-horizon is retirement. You didn't tell us how old you are, so I really don't know what that is. But, some viable time-frames include 10, 20, and 30 years. From your statements, I presume you are very risk-averse. This may just be your personality, or it may be that the stock-drop has scared you, and you're scared because you don't understand your investments. You should know that in 90% of all 10-year time-frames, stocks have outperformed all other investment vehicles, including bonds, money-markets, CD's, etc. The only 10-year period during which the stock-market has ever lost money is during the Great Depression (which wouldn't have lasted so long if the government had allowed the market to naturally correct for the inflation). With that in mind, if you have a long-time horizon (I'd say at least 10 years), then stocks will probably be your best choice. I'd recommend some kind of index-fund, because you obviously are uncomfortable with risks, and index-funds take out some variability. You may want to consider a total-market index fund, S&P 500 index fund, value-index fund, or growth-index fund. If there are offerings available, you may also want to look at a consumer-goods index fund and a capital-goods index fund (consumer goods are goods purhcased directly by the consumer, capital goods are purchased by companies). Growth stocks and capital-goods companies tend to do well during a boom; value-stocks and consumer-goods companies tend to do well during a bust. When investing in these kinds of things, you may want to employ dollar cost averaging on the smallest period you can (DCA is as strategy where you invest a given amount each day, week, month, or even year). You may also want to give though to an emotionally gut-wrenching strategy, which would be investing slightly more as the market goes down, slightly less as it goes up. It is usually precisely when the market is going up the most, and optimism is at it's highest (when the economists start saying, "we're in a new economic era of no busts"), that you should be the most worried. If, after looking at the merits of stocks and mutual funds, you decide it isn't for you, then you should probably consider bonds. Bonds are a much less volatile investment, and you are much less likely to lose money over the short-term. There is a wide range of bonds in terms of quality-rating and return, ranging from junk bonds to government bonds. Junk bonds and foreign bonds will have the highest return, but will have the highest probability of renigging (not paying you back, due to bankruptcy). Individual investors probably should be weary of these, since they require special care in picking. I don't recommend bond-funds, since they turn an otherwise stable investment into an unstable one, and add an expense ratio.

Thanks for noting the exception. This is a good reason why people should put as much money as they can into a Roth IRA now, not later. It's important to engage in asset protection before you're sued, because -- even without the NY state exception -- your transactions can be undone if a court thinks they were done for fraudulent purposes (and clearly, placing money that would otherwise go to a ruling into a Roth IRA is for fraudulent purposes). If you are interested in asset protection in general, you may want to visit this e-book. Regarding the new bankruptcy law, it is a mixed bag, which curtails the priviledges afforded debtors in some areas, and curtails the tactics used by creditors in others. The inclusion of the Roth IRA in protection is good, however. It's worth giving the proposed legislation a read. And it's always amusing the hear the government talking about giving counsel to those who go bankrupt, so that they can "better manage their money and not go into debt".