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Author: Brett257 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75383  
Subject: Help with my Roth IRA investments! Date: 4/25/2002 11:09 AM
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I posted on one of the other forums here and I was told that before I contribute to my drip plans that I should max out my IRA. So I have now decided that I will open a Roth IRA as soon as I get $500. I will use www.Scottrade.com for the commision free mutual fund purchase. I have been researching the Vangaurd funds for a while. How would this sound?

50% in VFINX(500 index fund)
30% in NAESX(Small-cap Value index)
20% in VTSMX(Total stock market index)

Does that sound ok? Any suggestions would be help full. They all have low expense ratios as well. Thanks a lot. Also...I'm only 20. Should I consider a different allocation or would this be fine. I don't think I will be able to make the full contribution this year, but I'll have fun trying. Thanks again

Brett
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Author: joebedford Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34345 of 75383
Subject: Re: Help with my Roth IRA investments! Date: 4/25/2002 11:48 AM
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Hmmm. My initial thought is that you might have too much overlap. The investments of the first two funds would also be included in the third, meaning that your portfolio may not be as diversified as it could be. From past recent experience on these boards, some will no doubt tell you to go exclusively with VTSMX. :-) Me personally, I would replace VTSMX with VGTSX, Vanguard's Total International Index Fund. Not only would this eliminate the overlap problem, it would actually add diversification to your portfolio by adding some foreign stocks your mix. The reasoning being that some factors that affect the US market may not affect other markets as much, if at all.

Thanks!
Joe

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Author: ralph710 Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34346 of 75383
Subject: Re: Help with my Roth IRA investments! Date: 4/25/2002 11:51 AM
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Give some thoughts to the low balance fee charged by Vanguard. I believe the fee is $10/year for balances under $5000 (it could be $10,000). I would suggest sticking to 1 fund (VFINX or VTSMX) until
your balance gets large enough to avoid the fee. Regardless of the fee, I encourage you to continue contributing to an IRA. You're making a good start!

Do you have a particular reason to use Scottrade instead of just going directly to Vanguard?

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Author: Jacketfan Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34347 of 75383
Subject: Re: Help with my Roth IRA investments! Date: 4/25/2002 12:20 PM
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Give some thoughts to the low balance fee charged by Vanguard. I believe the fee is $10/year for balances under $5000 (it could be $10,000). I would suggest sticking to 1 fund (VFINX or VTSMX) until
your balance gets large enough to avoid the fee.


Ditto. People (especially financial planners) make too much out of diversification early in an investors life. Pick one thing that you believe in (stocks I mean) and stay with it for a while. Pick up diversification along the way. You just need to end up diversified...the path you take doesn't matter. The fees you pay do.

- Tom

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Author: joebedford Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34348 of 75383
Subject: Re: Help with my Roth IRA investments! Date: 4/25/2002 1:00 PM
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I do not disagree with the advice of the two previous posters. :-)

Thanks!
Joe

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34349 of 75383
Subject: Re: Help with my Roth IRA investments! Date: 4/25/2002 2:27 PM
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Give some thoughts to the low balance fee charged by Vanguard. I believe the fee is $10/year for balances under $5000 (it could be $10,000).

If your IRA is held at Vanguard, the fee is:
- $10/year for each fund whose balance is below $5000 [this can be paid using money outside the IRA]
- an additional $10/year for each INDEX fund whose balance is below $5000 [must be paid from money inside the IRA]

However, if the fund is held at a broker, these fees don't apply.

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Author: Brett257 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34351 of 75383
Subject: Re: Help with my Roth IRA investments! Date: 4/25/2002 4:39 PM
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Thanks for all the advice you guys. I had planned on going with scottrade, because when I start to invest in stocks they have rather low commissions on buys. Where as vangaurd as $20 commisions for internet buys. I have a few drips, but I am going to hold off on all of those until I get my IRA maxed out for the year. Should I just save up and put the maximum in say next tax season, or just slowly contribute to the IRA? It is going to be a Roth. I like the idea of no taxes when I retire in say 45 years.

Brett

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Author: WPatch Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34352 of 75383
Subject: Re: Help with my Roth IRA investments! Date: 4/25/2002 4:58 PM
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- an additional $10/year for each INDEX fund whose balance is below $5000 [must be paid from money inside the IRA]

The index fund fee(usually collected from dividnds at $2.50 per quarter) is assessed on Index funds with balances below $10,000.


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Author: bigcaat Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34353 of 75383
Subject: Re: Help with my Roth IRA investments! Date: 4/25/2002 5:55 PM
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Hi Brett.

If you start your Roth at Scottrade, you will not be charged the Vanguard fees as long as you have a minimum of $1000 in the fund.

Since you are young, I would suggest you save up that extra $500 to reach a $1000 and put VTSMX into your account. That will give you both small and midcap exposure, as well as the large cap that you would be duplicating by buying VFINX anyway. Too much overlap there. It would be redundant.

Invest into that for a while. After that, if you still want to increase your small-cap exposure, you can then add NAESX (Both of these funds I just bought today in my own Roth at Scottrade). Down the road, when you get a little older, you can add in bonds.

(If you think that you might like to invest in ETFs, email me and I will send you a reference number to put on your application. It will each of us 3 free trades.)

Hope this helps.
Caat


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Author: mikeg1382 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34354 of 75383
Subject: Re: Help with my Roth IRA investments! Date: 4/25/2002 9:57 PM
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<<<The index fund fee(usually collected from dividnds at $2.50 per quarter) is assessed on Index funds with balances below $10,000.>>>

That sounded wrong to me, so I looked it up. The $2.50 is the regular fund fee, which is taken right out of the account, while the $10 custodial fee is pre-payable and is per fund held in the account until a balance of $5000 is reached for each fund. The following is right off of Vanguard's website, www.vanguard.com. :

To cover the cost of tax reporting, Vanguard charges a custodial fee of $10 a year for each fund account having a balance of less than $5,000 in traditional, Roth, SEP–, and SIMPLE IRAs. (The same fee applies to individual 403(b)(7) fund accounts, regardless of balance.) For example, if you have an IRA invested in two funds that both have balances of less than $5,000, you will owe two fees, or $20 for the year.


Also, the question was asked about how often to fund the IRA. Everyone is different, but I like to try to take advantage of dollar cost averaging by sending in a check every week. It makes for a lot of checks, but I don't mind. I think of it as paying myself evey week right after my paycheck comes in!

Mike in NJ

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Author: bigcaat Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34360 of 75383
Subject: Re: Help with my Roth IRA investments! Date: 4/26/2002 12:33 PM
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That sounded wrong to me, so I looked it up. The $2.50 is the regular fund fee, which is taken right out of the account, while the $10 custodial fee is pre-payable and is per fund held in the account until a balance of $5000 is reached for each fund.

I wrote a post on this some time back. Thought I would reference it, in case it might provide additional help.
http://boards.fool.com/Message.asp?mid=14988801

Caat


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Author: jin210 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34361 of 75383
Subject: Re: Help with my Roth IRA investments! Date: 4/26/2002 12:56 PM
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hiya,
with $500, just stick with either S&P 500 or Total Stock Market (forgot the symbols). when you get more money... depends on what each person's definition of more but, in my case, at least $10,000, start diversifying between small cap, mid cap, or whatever you feel comfortable.

in the meantime, research mutual funds, stock markets and whatever other source you can. by the time you hit that $10,000, maybe you'll go with only mid cap, only large cap, only small cap or combination of all three. if you still feel uncomfortable by the time you reach $10,000, my recommendation would be to stick it in both S&P 500 and total stock market.

good luck,
jin

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Author: bigcaat Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34363 of 75383
Subject: Re: Help with my Roth IRA investments! Date: 4/26/2002 1:12 PM
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hiya,
with $500, just stick with either S&P 500 or Total Stock Market (forgot the symbols). when you get more money... depends on what each person's definition of more but, in my case, at least $10,000, start diversifying between small cap, mid cap, or whatever you feel comfortable.


Or consider looking into TIAA-CREF. Just another option.

Caat

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Author: Belgoboy Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34384 of 75383
Subject: Re: Help with my Roth IRA investments! Date: 4/28/2002 5:27 PM
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If you want to see how your choices overlap in an IRA or not I think this site is great, and free: http://portfolio.morningstar.com/InstantXRay/Instant.asp?input=D

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Author: Belgoboy Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34385 of 75383
Subject: Re: Help with my Roth IRA investments! Date: 4/28/2002 5:33 PM
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My mistake on the link sorry: http://portfolio.morningstar.com/InstantXray/InstantxrayDEntry.asp?lnav=portInst

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