comparison of ira

[Guest scotty69]

are there any sources for comparing roth ira earnings? i am thinking of starting a roth and there is so much info, but no way to compare performance.

Do you choose a mutual fund to invest in?

[Theresa Lynn]

You would look at the investment returns of the types of investments that you are considering. For example, if you are investing in mutual funds, compare mutual funds within the categories of funds that you are considering. If fixed income, look at fixed income investments. It really has more to do with the investment media that you select. The fact that the investment is a Roth IRA is of little consequence except for the fact that you need to find a custodian that is an approved IRA custodian or bank/trust company.

[John G]

There are about 8,000 mutual funds, so it is easy to get confused.

First, the MF world is divided into LOADED and NO LOAD. Loaded means that there is a "commission" or percent fee charged, often something like 6-7% up front. Loaded funds were the first to be developed. No load means there is no percent charge up front, but there are other costs which I will discus later. Of course, it gets a little more complicated than this (of course!) when you consider that there are low load (2-3% fees) and loaded funds where the fees are taken when you sell the fund rather than when you put funds in (back end loaded).

Other fees? Yes, all funds have various annual expenses which are described in the prospectus. These fees can range from more than 2% (ouch!) to about 0.17%.

More fees? Yes, many, but not all, mutual funds charge an annual fee for IRA accounts. These fees (custodial fees) can be as high as $100, but many are in the $20 range.

Choices

There are lots of investment styles to choose from. The original mutual funds where actively managed portfolios of a broad mix of stocks. Over time new kinds of funds emerged: growth, dividend and income, bond, and sector (telecom, retail, paper industry, etc.).

A relatively new development is INDEX funds. These are not actively managed. The fund buys all the stocks on a well published list. Gone are the analysts, field visits, airline tickets, hotel bills, cell phones, etc. The mutual fund giant, Vanguard, was the first to develop these kinds of index funds. The advantage of index funds is that they have ultra low expenses and they are always completely invested. This means all your dollars are put to work and very little is skimmed off for expenses.

Conclusion

You don't need to know lots of funds. As a beginner, you really need 1 good general purpose fund... maybe a few years from now you might want to have part of your IRA in a second fund. An S&P500 index fund would do a great job. So would any general purpose stock fund. Remember, you should look for the NO LOAD funds. Consumer Reports prints a list of about 100 very good mutual funds each March issue. You can find this at most public libraries.

Post again if you have other questions.