Were can I find Roth IRA rates?

[Guest Ben Merritt]

Is there a site where many different mortgage companies and banks current Roth IRA rates are shown? Do they vary greatly? I'm just trying to save myself some legwork tracking down rates from individual moortgage companies and banks and would appreciate any advice you could give a novice investor. I really appreciate your time and your help.

[John G]

Rates? Sounds like you are looking for money market or CD type investments. Rates are driven by overall economic conditions including the underlying level of inflation. Rates vary slightly between institutions and vary more significantly based upon the duration of the investment and the perceived risk. Risk? Well, some investments are insured against loss of principal like bank CDs so they have the lowest rates. Reits (like "CARS") and commercial paper have higher, but more risky yields. Duration? I am talking about the differences between floating, 1 yr, 3yr, 10 yr etc.

Before you jump into an investment driven by interest rates, you should consider equity (aka stock) investments. The differences in performance between "asset classes" (equities vs CDs vs bonds) is more significant than the slight variations in rates. Over the long haul, stocks have historically provided a better return. Interest yielding investments typically offer annual returns just above the rate of inflation. Equity investments have averaged around 11%/yr return.

Roth IRAs are ussually very long term investments. Over multiple decades, a portfolio with a significant equity component will produce a much larger nest egg. Investing in the stock market is investing in the future which in the USA has been a plus. Investing in "rates" is typically just picking an IOU. Perhaps a crude way to put it, but in a successful capitalistic country money flowing (via stock market) to GE, Microsoft, Best Buy and Merck does better.

If you are just getting started, you may want to look into an index based mutual fund such as the Schwab 1000 or Vanguard 500. You do NOT need to pick a winning stock, you own a small piece of 500 or 1000 companies. You will find the March issue of Consumer Reports covers the basics on retirement planning. I would also suggest that you suscribe to Kiplinger Financial magazine, which in my view is the best $15 a novice invester can spend. One hour a month spent learning about investing is a good starting point.

Got more questions? Post 'em here and we will try to help.