New Roth IRA

[Guest ironworm]

So let me explain a little bit. I am turning 19 and I want to start saving now. I opened a Roth IRA with my bank and will invest $200 a month until I retire. I was not aware that when I started a Roth IRA I had to do my own investing

Im not sure what to invest in stocks MF or what

Any ideas?

P.S I would like if this were a setup and check here and there a couple times a year.

[Lori H]

the younger you are the more aggressively you should invest. Mutual funds are, in most cases, safer investments than stock.

morningstar is a great tool with lots of helpful advice.

[GMK]

Good for you, ironworm. Great attitude. Great plan. You're doing what many of us wish we had done at your age.

Many factors come into play in investing. You don't have to be an expert in everything, but at least learn the basics.

I agree with Lori H that Morningstar is a great tool. In addition, most of the big mutual fund firms, like Vanguard, have a lot of useful educational information on their web sites. And the library has free books.

One thing to consider is the expense ratio of any mutual fund or other investment. This is basically the "price" you pay to be in the fund or investment. A lower expense ratio means that you keep more of your money in the fund to earn more money for you. This is a good thing.

And learn about diversification, as in don't put all your eggs in one basket.

Good luck.

[John G]

I don't know how you got the idea to do this, but starting early and building up a Roth account is a great idea. Roths are a wonderful tax shelter - if you are successful in life, you will eventually benefit from having some assets in a tax shelter...plus the extra Roth flexibility of rules governing dispersements.

You are a small time investor at this point. When you assets are huge (lets say 6+ digits) you could find someone who might manage your account for a fee. You don't learn much, and if you pick someone named Burnee Madeoff (spelling?) you may never see your money again. I'm a big fan in folks taking charge of their own investing.

Since $200 per month will take some time to grow, I would suggest choosing a internet brokerage (Schwab, Etrade, Scottrade, etc. there are many) or a mutual fund "family" (Janus, T Rowe, Vanguard...again hundreds of choices). Why? because you need to initially find just one general purpose fund that will accumulate your contributions for 3-5 years. When you assets get beyond 20K (perhaps even 10K), you might want to consider choosing a second fund. For example, you might choose a broadly based market fund initially, then a international fund later on. I say gernal purpose fund (as opposed to narrowly defined industry fund like "Health" or "Tech", or a country specific fund like India or China - because these are broadly diversified. YOu give up the chance to hitting a home run by picking a hot area, but instead will more likely get something more like avg performance. In investing, average is not horrible. You can amass a huge fortune by starting early and getting a consistent good return. Trying to find the next Netflix (or ten years ago Cisco or Dell) is not only hard, you also need to figure out when to pocket your gain and sell.

Time is your friend. Good investing is not at all like river boat gambling. You diversify to spread your risk. I recommend choosing a mutual fund because you get diversification and there is less time commitment on your part...sure you can watch it, but it will be like watching paint dry most of the time. If you have the urge to take long shots - try a lottory ticket. When your assets grow to perhaps 50K, you might split off 5K to experiment with your best ideas. Example, you think a Brazil fund might do very well. You don't bet the farm on these kinds of investments. 5-10% is the max I would recommend and I would not even think of this until you learn the ropes.

A very good short term investment would be to subscribe to a monthly magazine. I recommend Kiplingers Financial for people in their 20s. It covers investing, buying a home, career development, credit, travel, mut funds, etc. I think the annual rate is about $16.

You will learn a lot in the next ten years. I'm turning 60 and I learn new things about investing every week.