where to get the best roth ira

[Guest MELANIE C]

who is offering the most competitive roth ira rates?

[Guest Lyric]

Any mutual fund account can be opened as a Roth IRA, and one IRA account can include as many funds as you like. It's easier to keep them in the same fund family because of the paperwork.

Go for 100% no loads (there is no evidence that paying commission to a broker improves the performance of the fund -- he/she is merely a salesperson). There are lots of no-loads out there, but if you want a specific suggestion, try Vanguard. Their funds have a low expense ratio, steady performance, and lots of funds to choose from. Which of their funds you buy (stocks, bonds, money market; domestic, foreign, international, large cap, small cap, emerging markets; aggressive, moderate growth, conservative; indexed or actively managed) depends on your investment horizon, your asset allocation overall (counting ALL your investments, not just your IRA) and your risk tolerance. The closer you are to retirement, the less volatile you want your investments to be. That's the time to have a greater percentage of bonds in your portfolio. But diversification is the best protection against market volatility, because not everything goes up and down at the same time, so you are less likely to lose everything if a particular stock or sector goes down.

Most of their funds require a $3,000 initial investment, but only $1,000 if it's going to be an IRA. Thereafter you can add $166 a month or $2,000 a year, anytime during the year.

If you are new to investing, you might try one of Vanguard's LifeStrategy funds, which are already diversified, so you don't need to worry about balancing the kinds of investments you have. Good for beginners and couch potatoes. Read "Mutual Funds for Dummies"!! An IRA is like any other investment. Do your homework. The difference is its tax status. Once you've maxed out your contributions to your tax sheltered accounts like a 401(k) and IRAs, you can put any money you still have to invest in a taxable account.

Good luck!

[John G]

Melanie, nice short Q. I am assuming that you are either new to investing or just asking about interest rate type investments. There is no simple answer to your question, because investments involve a tradeoff between expected returns and risk. If you are extremely risk adverse, you should be in money market funds, bank CDs or other government paper. Returns will be in the 4% to 6% depending upon the type of investment and the length of time you tie up your funds.

If you are young, or more of a risk taker, you should be selecting higher risk/reward investment options. The long term average for a diversified stock fund is 10%/year or possibly a little higher. In any given year, however, you could see a 30% drop or a 45% gain. The bad years occur less often than the positive ones, which is how the average is 10+%. If you stay invested for 20 years, you really can ignor the few bad years. I believe that there is no 20 year period of time since 1920 when the stock market was overall down... not even for those people who first invested in 1929.

If your IRA assets are less than $20K, I would recommend that you use no load mutual funds. There are 7000+ mutual funds. A list of 100 good ones can be found in Consumer's Reports this last month. Money, Kiplinger and Morningstar are all good souces of fund phone numbers. No load means that there are no 3% or 6 1/2% fees up front. Other fees to watch out for are the annual IRA fee and the annual management fee.