Guest GoGreen Posted January 12, 2000 Posted January 12, 2000 I'm very new to investing, and know basically nothing. I'm 24, and I'd like to get started early. I have about $1,400 in a 401K from my previous employer. I have a friend that would like me to give him this money to put into a Roth IRA. I'm a little concerned, because there is a large annual cost to hire his services. ($150-$200). This seems excessive for my small initial investment. Can I get started in a Roth IRA for less money than this? Should I just leave my money where it is? I don't think they are charging me much to invest my money in Mutual Funds.
John G Posted January 13, 2000 Posted January 13, 2000 Lots of folks post Qs on this site that are new to investing. You may want to scan the questions and answers at this site. Congratulations on starting early. Great idea. First, you may be able to leave the 401K money with the prior employer... ask the benefits or HR dept about your options. Ask them about the annual costs, since former employees often must pick up the costs that the employer used to cover. You can also roll those funds over into another custodial account. The problem with the $150-200 fee is that this amounts to more than 10% of your 401k, which makes it very hard to get those funds to grow. Ussually fees like this are associated with accounts where someone is providing advice. Sounds like you friend is trying to sign up new customers. A true friend would understand if you say that it is not cost effective for him/her to handle your account. You have the option to "self direct" your financial affairs. This means you do some research on your own and also make some phone calls to find both a custodian and an investment vehicle. A good place to start is to read the March 1999 Consumers Report which gives an overview of retirement plan rollovers and a boiled down list of respectable mutual funds (there are 8000+, initially you only need one). I would also suggest subscribing to Kiplinger mag or read it at the library... it covers investing and a range of topics useful early in your career. Concerning mutual funds. This is probably where you want to get started. MFs are often clustered in "families" such as Vanguard, American Century, Janus, etc. You can find the 800 phone numbers in CR or K mentioned above. Call a few, tell them you are getting started and explain your situation. They often have PR material targeted toward both getting started and rollovers. Most custodians charge some type of annual fee, you might find that these range between $10 to $50/year. Shop around. After you assets grow beyond $10K or so these fees are often waived. At the outset of your career, a good broad based MF may meet your needs for many years. For example, a Vanguard 500 index fund has very low annual expense (this is different from custodial fees) and includes the stocks of 500 large USA corporations. In addition to the existing 401K funds, you may want to start a systematic investment plan using a Roth IRA. The MFs can send you info on that as well. I made my first investment when I was 28, so you have me beat by atleast 5 years. Good luck. Feel free to email questions. John [This message has been edited by John G (edited 01-12-2000).]
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