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Subject:  Re: Best way to invest in a ROTH IRA Date:  9/20/2005  1:30 PM
Author:  cliff666 Number:  47643 of 88051

This financial advisor has talked her in to opening a ROTH IRA (smart move and something we have meant to do for some time now), but he wants to take 5.75% from each deposit - his fee and his brokers fee (ING Direct)? Once he takes his cut, he is suggesting she use the rest of the proceeds to purchase AMERICAN FUNDS families of mutual funds. They do look to have good performance, and she wants something that she can directly deposit money into each month and not look at or touch. She likes funds because she does not want to spend time researching individual stocks.

You don't say how much is involved. I suppose a Roth is limited to $4000. So, yes American gets a 5.75% front-end load.

I started my investing with American, and they still represent the largest part of my portfolio. The good news is that the load goes down as you accumulate more. At $50,000 it goes to 4.5%, iirc. By $1 million it is zero. American markets exclusively through brokers, and (sadly) these guys want to be paid. I find I value my broker's advice, but not as my only source of advice.

I don't know any way to get free management. Either she learns what to do and manages the portfolio herself, or you will have to pay someone. When I started, I was happy to have the advice. I have since become more Foolish, and my recent acquisitions have been Vanguard Index Funds. I will mention that I am retiring soon, and I may roll my 401K into <gasp!> American Funds, because I like their style, and they have some funds I like. They automatically include a significant international exposure in such funds as New Perspective, Small Cap World, or Capital World Growth and Income, and I like not having to think about it. (Yes, I'm lazy.) I also know my advisor personally, and he knows who I am when I call. If I need money, I call him and the money is wired to my bank the next business day. It's not all bad.

So, I wouldn't throw them out because of the load. Other funds also charge a load if they are sold through brokers. There are plenty of no-load funds out in the world, and their performance is comparable to the loaded funds, so why load? Basically, just for the convenience and assurance that somebody cares.
Hope this helps

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