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Author: rkmacdonald Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75340  
Subject: Re: Opening my first Roth IRA Date: 12/16/2004 5:03 PM
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jvenz wrote:

I want to open our first Roth IRA account, and I am looking for some advice. My investing experience to date consists of setting up our (my wife and I) 401(k) accounts, and trying to educate myself over the past year or so. I am 26 years old, so I am looking to have the money in this account for 30+ years.

I have talked with a financial advisor recently, and he had recommended that Ameritrade would be a good place to set up an IRA if I decide to go out on my own, rather than work with him. If I do go on my own, I would like something that allows me to trade stocks, bonds, and mutual funds as cheaply as possible. I would probably start with something like an S&P 500 index fund, until I decide on something more specific. Ameritrade looks pretty good, but Brown|Co seems to be potentially cheaper. Does anyone have an opinion of either of these companies, or any other company?

I have another, more general investing question, regarding dollar-cost averaging. I have read of the advantages of dollar-cost averaging, but it seems that if I were to invest $500 a month, doing 2-3 purchases/trades a month, commission costs on stock/mutual fund trades could eat up a lot of my gains. Would it be better to just invest once a year, or am I missing something? I am interested in taking the free trial on a couple of the Motley Fool newsletters, but I don't know if it is worth the cost of the subscription fee, plus a couple potential trades each month.


Hi Jeff and welcome to the Retirement Investing board. I think you have come to the right place.

If you want to invest in the stock market, then an online brokerage is the best thing for you. Which brokerage you should choose is an ongoing debate on the 'Discount Brokers' board at http://boards.fool.com/Messages.asp?mid=21759249&bid=100146. Read that board to find out which brokerage Fools currently like best.

Most discount brokerages allow investing in both mutual funds as well as stocks, but there are hefty fees for some of the mutual funds as well as commissions for stock trades.

If you want to dollar cost average (DCA), I think it would be better to use a low-cost, no-load mutual fund, because there is no extra charge (ie, no commissions) for DCAing. You set up your Roth IRA directly with the mutual fund company. I like Vanguard for this purpose because they have some of the lowest Expense Ratios (costs to manage the funds) in the industry. Check them out at http://www.vanguard.com .

BTW, Vanguard has somewhat of a cult-like following called the Vanguard Diehards on the Morningstar site, and you can read their posts at http://www.diehards.org/

Later, after you accumulate some money, you might decide that you want to invest Roth IRA funds in individual stocks. So, just set up another Roth IRA at a discount brokerage and transfer some funds from the first Roth to the second Roth. You can have as many Roth IRA accounts as you want.

Russ
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