Is One Roth Better Than Another?

[Guest marc_c]

Greetings,

I am planning to open a ROTH IRA for the first time and I plan to make my investments in stocks via mutual funds.

Question:

For this kind of investment, which may be the better option for opening a Roth:

a) a mutual funds company (e.g. Fidelity, Janus, Vanguard, etc)?

b) a brokrage firm?

c) other?

Thanks,

Marc

[John G]

I am no fan of "other" which ussually means banks or insurance companies.

Both mutual funds and brokerage options are viable. Since you are just getting started, you will probably be owning one or two mutual funds which can be done either directly with a mutual fund family or via a brokerage.

Most brokerages give you access to hundreds if not thousands of mutual funds across fund families. If you choose a mutual fund you will be selecting from a narrower set of funds they managed .... but that often means picking a fund from a list of 10 to 60+ funds. I don't think you will find a lack of investment choices to be a problem. The opposite is probably true, you may spend too much time trying to make a perfect choice from too many funds.

Are you more comfortable with using a custodian that has a local branch office? Some companies like Scottrade, Schwab and Fidelity have offices in most major cities. Others, like Vanguard prefer a main office 800 numbers and a website. Almost all companies (especially the three you mention) have very good websites. Generally levels of service are pretty good.

Fees will vary slightly among custodians. If you have other accounts, a sizeable Roth, or are willing to elect email notifications (such as with Etrade) you can avoid or minimize annual fees.

I would contact three different custodians and ask for information for the beginning investor. Then visit their websites. Ask about annual fees. Look at a couple of broadly based NO LOAD mutual funds - especially those with annual expenses below 1%.

You can't optomize a choice like this. There is a wide array of mutual funds and custodians that will work for you.

[Guest sunpharee]

i'm opening a roth this week too.I think I'm gonna go with scottrade, unless i hear different...they compare themselves to a lot of other places (fidelity)and have the lowest fees.

somehow its better if you register online, but you still have to go the the office...just at a better rate.

now, if i only knew what investments to pick...I want to do 85 in index and 15 in foreign....thats about all i know..lol

[John G]

Why if you are just getting started do you think you need 15% international and 85% index? You provide no other information about other investments or your age.... but it sounds like you are just getting started.

Don't split a lot of hairs in making your first Roth contribution and first investment decision. Pick one good general purpose stock fund - a no load index fund with annual expense below 0.25% would be a fine choice for year 1. All general purpose mutual funds have a reasonable amount of diversification... in the short term, your 15% international component may just mean higher fees because of two funds.

Then.... spend some time this year learning more about investments. You might decide to continue with the same fund or pick a second one at some point down the road.

DO NOT INVEST IN THINGS YOU DO NOT UNDERSTAND.