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Author: kuvholt2 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75873  
Subject: Re: One IRA or 2? Date: 7/8/2002 11:45 AM
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I was thinking of 2 IRA's in 2 completely different mutual funds targeting different strategies. Just for example 1 in a large value, 1 in a GNMA. Or, 1 in a mutual fund, 1 at a discount brokerage with a few stocks.
I don't have 1 in bank CD's. I do have one at Vanguard.

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You should be able to invest in more than one fund in the same IRA, for example, I have a Roth IRA at fidelity and invest in 4 funds currently (all fidelity funds but I have the option of other families, like Vanguard for example). The only thing I can't figure out with mine is how to buy stocks as mine is a "Mutual Fund Account" I have been meaning to call Fidelity what I need to do to be able to invest in stocks in my Roth, but haven't taken that step yet.

However, you said you wanted "2 completely different mutual funds" "example 1 in a large value, 1 in a GNMA. Or, 1 in a mutual fund, 1 at a discount brokerage". Not to argue semantics but this is different from having two different mutual funds. Mutual funds invest in stocks, bonds, treasuries and other securities, but their biggest feature is that there is a portfolio manager (or management team depending on the fund and fund family) who make decisions regarding investments in the fund. This is probably more basic than what you're asking but let me run over it anyway. The mutual fund therefore has an objective (as you mentioned to invest in large cap stocks). The advantage of a fund is that is diversified (mutual funds are never allowed to have more than 5% of their holdings in one stock, so the least diversified fund would have 20 stocks of 5% each), that it is professionally managed (this is both good and bad, but if you don't follow the market at all this is a plus for you), and that you can compare the performace of the fund against standard benchmarks (like the lipper average for that type of fund, or the index fund that that fund competes against). The disadvantages of a fund is that it is professionally managed, meaning that the fund will operate in certain standard ways which reduce the volitility of the fund but also reduce the upside potential, the fund if large can only make meaningful investments in larger companies (again because of limitations on how much of one company a fund can own). There are other positive and negative implications of investing in any type of fund, always read the literature available about the fund before making an investment.

As for your specific situation, I checked the Vanguard website, and it says this about IRA's :

Investment Options

Minimum to open a traditional IRA: $1,000.
Investment types: Most Vanguard mutual funds, along with individual stocks, bonds, options, certificates of deposit (CDs), and more than 2,600 mutual funds from other fund families available through Vanguard Brokerage Services®.

This about Roth IRA's :

Minimum to open a Roth IRA: $1,000.
Investment types: Most Vanguard mutual funds, along with individual stocks, bonds, options, certificates of deposit (CDs), and more than 2,600 mutual funds from other fund families available through Vanguard Brokerage Services®.

So if this is correct you should be able to buy funds in other fund families or these other types of investments. I would recommend that if you want another IRA for the purpose of having other types of investments, I would first look at if you can invest in these types of securities in your current accounts. Most IRA custodians charge some type of fee, so consolidating your IRA holdings at one custodian will tend to reduce your total fees.

I hope this helps.
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