Investing in IRA . . .

[Guest Arthur Miranda]

We need to contribute $500 each for our two daughters for the tax exempt education IRA. We are a bit confused as to the way in investing it, to get the best returns. Suggestions would be really appreciated. Thank you !

[John G]

The key to your answer is how much time before you will use the funds. If you children are very young (under 10) then you should probably have the funds in a broad based no load mutual fund that emphasizes stocks. If you expect to withdraw the funds for education in a few years, then you want interest bearing bonds or notes. In between, a mix makes the sense.

Generally, in all investing, you want to bias towards stocks as your holding period gets longer. The reason is that over the long haul the equity (aka stock) markets perform better. However, in any given year the stock market can be up or down. Back to back down years, while rare, have occured a few times in the past 50 years.

[Guest Arthur Miranda]

Mr. John G.

Thank you sir.