Roth IRA at a credit union

[Guest zosoo7]

Hello, I'm 22 and I opened up a Roth at my credit union about 2 months ago. I have heard lately that it is better to open your roth with an investment company rather than a bank? Can anybody shed any light on this and give me some recomendations or websites. Thanks.

[John G]

Some of the major choices for a Roth custodian include: mutual fund, brokerage, bank, and credit union. Each option has positives and negatives. Banks and credit unions usually have the narrowest choices for investment options. When you are just getting started, getting off square one is more important the focusing on your investment choices. But, eventually your Roth assets grow and you want to invest wisely for the long haul.

As you are in your 20s, the long haul is measured in many many decades. Stocks (aka equities) tend to outperform many more conservative types of investments over long periods. In any given year, stocks can be up or down. As the hold period gets longer, stocks on average perform well. For example, a lot of folks use 10% as the long run average for a very mixed collection of stocks. If you were to focus slightly away from utilities and blue chips and more towards growing companies the long run annual percent is often considered notch higher. Bond performance also flucuates, but over the long haul does not usually match stocks for performance.

What options did your credit union offer? I would imagine that CDs were most likely. Very low risk, but a corresponding low annual return.

You should consider subscribing to Kiplinger Financial or Money magazines and start building up your understanding of investment basics. Your local library also has lots of books on the subject. You need to decide what types of investments suit your tolerance for risk and your long term objectives.

Post again if you have questions.