ETF'S

[Guest runninlate]

Does anyone have a current opinion on ETF's for example TD Ameritrade has a few selections within my account that I can choose from.

I have a Roth account with them in the Amerivest vehicle which is with the Russell 3000 and it has earned almost $600 since April 2006 from 2 years of Roth contributions (max.).

The asset allocation is about 80% stocks (IWV) , 16% bonds (AIGG) , and 4% cash.

It seems to be doing ok but now that the price I paid for the stocks $76.20 and bonds $98.10 per share have risen (which is good) and are now $81.30 and $101.20 and it is time to start investing again now that I can, it being 2007 I am concerned about making a choice on either investing the max. all at once or on a monthly basis.

Am I diversified enough with Russell 3000 (supposed to be a well diversified vehicle) and should I can continue investing in this alone or start investing in mutual funds ou

tside of the ETF to make my portfolio even more diversified ?

Here is some history

almost 39 years old

will be investing forever

will max out the yearly Roth contributions (with a retirement goal of 42000 per year based on withdrawls of 4 or 5 % per year after age 69)

Am investing regularly in an individual account (outside of the Roth account to create additional retirement income) of at least the same amount as the Roth

Any advice on my current situation ( I feel as if I have started later than I would have liked but better late than never I suppose)

[John G]

IWV is the ETF equivalent of a Russell 3000 index fund, which covers the 3,000 largest US equities. 3K of anything is considerable diversification... but you get no small cap or international component with this ETF.

ETFs are exchange traded funds - I am not sure why you say you only have "few" selections to choose from. As TD Ameritrade is a discount broker, I would assume that you have access to all ETFs. Am I missing something?

You might want to consider adding and international or small cap or growth component to you portfolio. For the next ten years you will be accumulating you base Roth assets. During this initial period, have a small cluster (3-5 components) is all you need. You can choose index fund, ETF or attractive no-load low expense funds. Frankly, you could also do just fine being 100% Russell 3000 especially if you are willing to rise exactly with the US market. The IWV/Russell3k represents 90+% of the USA total market capitalization.

If you have the financial capacity to fully fund the 4K max on a Roth in January, I would recommend that you go ahead and do this. It maximizes the time the money is inside your Roth tax shelter. Once the money is inside, you can put it all to work immediately or in steps. The monthly contribution approach is called "dollar cost averaging" and offers two main advantages: (1) the contribution "hit" is spread over the year, and (2) you "buy" more shares when the market is lower and fewer when the market is high.

If you already have $8,000 in your Roths, and continue to put in the max amount (which will bump up) each year for 30 more years and achieve about a 10+% annual rate of return, you should build up a 1+ million dollar Roth account by age 69. Even more if you have a spouse doing the same. You could then start pulling $40,000 to 50,000 dollars out each year. Note this amount will not have the buying power of 40-50k today. However, you will be adding Social Security, a pension and other investments income. Think of this as you rough plan. Do continue with your non-Roth investments. Assume that Congress will change the max amounts and the types of programs, so you may have other options to consider in future years.

[Guest runninlate]

ETFs are exchange traded funds - I am not sure why you say you only have "few" selections to choose from. As TD Ameritrade is a discount broker, I would assume that you have access to all ETFs. Am I missing something?

Thanks John what I meant was inside my portfolio site (the Amerivest vehicle) I can manage my goal what they mean is change my ETF but when I go to this it allows me to choose only from three other ETF's which are VTI,ISI, and IYY.

I guess if I wanted to purchase any ETF's through Ameritrade other than these inside the Amerivest vehicle I would just purchase them on Ameritrade's website. I think that's what I would have to do anyway.

So I will do some research on some small cap growth additions and international funds

Thanks again for helping me think a little

[John G]

It sounds like your IRA may be in some kind of "sheltered" environment where choices are restricted. I don't know this firm, so I would recommend calling them and find out how to do what you want, or if you need to change the nature of your account.

If you are talking about a company plan of some kind, they may have decided to restrict the types of choices for administrative reasons.