roth ira - stocks or mutual funds ?

[Guest hustler98]

I am not sure whether to select stocks or mutual funds for my roth IRA. I read some previous threads regarding stocks that over time, the Ups would be greater than the downs for the stocks. In that case, should I invest a larger portion of my money into stocks ? Mutual funds seems to be more stable and less risky while the returns are not as high. I am currently 24 so will it be better to invest in the stocks because I can take the risk now ?

-hustler98

[John G]

Buying stocks directly is not really an option for someone just getting started for ALL of the following reasons:

1. Beginnners don't have much skill or experience in picking individual stocks.

2. The amount of money to invest initially is small.

3. Given 2, it is hard to have a diversified portfolio.

4. While picking stocks is not rocket science, it does take time to research ideas and later to track results.

Who says that mutual funds will perform below stocks? I sure didn't. But, since you are just getting started "better" or "worse" is not the issue.

Someone who is just 23 is going to have retirement funds invest for perhaps 40 years before they retire and 30 years after they retire. You absolutely want to bias your investments towards equities or stocks. BUT, you don't need to buy stocks directly to do this. You can buy a no load stock mutual fund or stock index fund.

This message board does not have lots of financial advisors, mostly there are accountants, tax preparers and a few lawyers. You probably want to find some confirming sources for the guidance I have given you. That means you will need to devote some time to reading financial magazines and the material for beginners that mutual funds and brokerages offer.

You don't need to hit home runs every year to be a successful investor. Walks, singles and a few doubles is a winning strategy. For you, this means finding investments that get you reasonable long term results. Three steps: (1) get started, (2) pick a basic no load fund that broadly covers the stock market, and (3) allocate some time to learn more about investing. Don't over think the procedure. You will know twice as much two years from now and a lot more by the time you are 30. At that point, you will hopefully have more than 25k in retirement funds and can consider other options.