Where do u recommend I open my IRA Account?

[Guest uthustler]

ive got $500 to open a Roth IRA, where do you suggest I go to open it? Thanks!

[dh003i]

Some good mutual fund companies to look at are Fidelity, Vanguard, and T. Rowe. If you're into bonds, you should investigate PIMCO, though I don't like bond funds, because they turn otherwise stable, predictable investments into unstable and unpredictable investments. There's also Royce.

For a detailed review of some Fund Families, take a look at Kiplinger's Personal Finance, August 2003, p32.

Fidelity probably offers the most choices, hands down. It's the very biggest mutual fund manager in the US. Vanguard offers the lowest expense-ratio funds. Be aware that if you're looking at funds in Vanguard other than their index funds, a lot of them require large initial investments (e.g., $10,000), though they are often well-managed and offer stellar expense-ratios (Vanguard Primecap has 14% return over the past 10years at an expense ratio of just 0.49%). T. Rowe also deserves strong consideration.

Some things you should look at are the diversity of funds offered (how many), the quality of the funds, the expense ratios of the funds, minimum initial investments, and if the mutual fund firm allows you to invest in other Fund Families without penalizing you. Also, when looking at specific funds within a Fund Family, be very wary of funds that have an initial front load or a back-load. I wouldn't ever invest in a fund with a front or back-end load (this i where they charge you a certain percentage just to get into or sell the fund). Also watch out for short-term trading fees. These aren't particularly important if you're dedicated to stick with the fund.

Right now, the most important thing for you is to look at the initial investment required by Fund Families, and if they offer exceptions for Roth IRA's. When inquiring with Fidelity or Vanguard, ask if they will allow smaller initial investments, contingent upon a regular investing schedule.

[John G]

Five hundred is a modest amount. It presents some practical problems if you are not planning to add more in the future. Here is why. Many custodians require a larger initial amount, and many charge annual fees. You may navigate past the first problem by asking the custodian what their minimum is if you adopt a monthly contribution program. The second issue, annual fees, can eat up most of the annual return of a small IRA. Here you also have some options. The monthly contribution sometimes eliminates the annual fee. A second option is to ask the financial organization where your family does the most business if they will waive the annual fee.

If $500 is a problem, you can a few other things. First you can wait until later this year if you think you may have more resources to allow a larger contribution. You can also consider just putting the funds into a basic savings account and build it up a few thousand and then open the IRA. If the $500 still looks like a problem, you can see if your employer has any plan that your can contribute to like a 401k or 403b.

To find out more about your options, your first step is to contact a custodian. They come in many flavors: banks, brokerages and mutual funds. These vary in terms of the investment options they offer, minimum amounts to start and annual fees. You can use any decent financial magazine to get some names of potential custodians. Your local newspaper will also list community options in March or April when folks are filing tax returns. I would call three possible choices and ask them to send you information they would recommend for someone just beginning... some of these are quite good.

Post again if you have more questions or want to provide more facts about your plans, age, etc.