i am in the final process of selecting a fund for my mothers Roth IRA. My dilemna is what route to take. She is 51 yrs old, conservative and just started a Roth a couple of years ago. I have researched several fund trying to figure out what is the best way to go. I am down to the following: Dodge & Cox Stock Fund (DODGX), Longleaf Partners Fund (LLPFX), Oakmark Fund (OAKBX), Third Avenue Fund (TAVFX), First Eagle Fund of America Y (FEAFX), Mairs & Power Growth (MPGFX) and Clipper (CFIMX). The other route I am looking at is Coroporate Bonds (ex. Tyco 7% over next 18 mos.). She has an acct through a full service brokerage (can't get her to switch over to discount...don't get me started...like i said conservative). Any immediate feedback would be appreciated as it is getting down to crunch time.

I consider all of those stock funds "aggressive". Over the long term, most of them will probably give a return above inflation when taxes are taken into account.

When you say "conservative", do you just mean "set in her ways" or "highly averse to risk"?

What is the timeframe? What is the purpose of the investment?

I had Oakmark fund for a while. I would class it as a value fund. Its manager had a great run playing one of the bank stocks that went through a series of acquisitions. He made out like a bandit and the fund did very well in the early '90s.

But he couldn't do it again. Oakmark completely missed the tech rally. It underperformed for all those years.

When techs crashed, Oakmark came back.

Its a very good example of a fund manager who once picked a winner and has been unable to do it again.

I would buy it only if you like value funds.

thanks for the feedback jrr7...I would say that she is "averse to risk". since she is 51 she has approx 9 years until she can "tap" into the roth. she intends to use this as another source of money once she retires along with her 401k. I imagine that she will retire in her early sixties, so she will not need access to it until that time. i appreciate your thoughts and feedback.

After 9 years, you will only have 12 years of growth in the Roth. I am assuming the 401K has been around a lot longer and is sizeable. You may want to consider pacing your distributions so that you plan to tap the 401K on retirement, Roth in say 20 years when she is around 70. That way you can have the time to take a more agressive approach than you might if trying to preserve funds for the shorter term.

the 401k has been around a long time and is sizeable. i think you hit the nail on the head....she will tap the 401k first and the Roth in approx. 20 years if need be.

You might also consider if a Roth is the right type of IRA, especially given your plan to tap and deplete the 401k money first. If the 401k is basically depleted by the time she is 70, you'll need to be taking distributions from the IRA anyway, so the RMD's from a traditional might not be a problem.

Further, if the IRA is the only source of income after 70, it seems likely that her tax burden will be quite low - maybe even low enough to avoid taxes altogether. If that's the case, then the current deduction for a traditional IRA could be worth more than future tax-free withdrawls from a Roth.

Just some things to consider.

--Peter

I just opened a Roth for $5000 (2k from last year, 3k from this year) and split the money between Dodge & Cox Stock fund and Mairs & Power Growth Fund. I spent several hours researching it and came up with those for the following reasons:

-investing philosophies I can understand and agree with
-longevity of fund & manager
-no-load & low expense ratio (both well below 1)
-outperformance of S&P 500 in YTD, 1yr, 3yr, 5yr, & 10yr annualizations
-low risk, high yield
-affordable minimum buy in
-major holdings consisting of a number of companies I've been considering investing in individually
-low IRA custodial fee (each $12.50/yr) payable with NON-INVESTED funds
-low turnover (although not a tax consideration with a Roth, it does affect costs).

When I plugged all these factors into the Morningstar screener, I only came up with 8 funds so it wasnt too hard to research them and pick the 2 i like best.

I know that index investing is the favorite method with FOOLS, but I just have a bad feeling about the index for the next year or so-- so I tried to apply FOOLISH criteria in picking two managed mutual funds. It's a little comforting to know there is a human being at least partially involved in the stock picks during this volatile time & by choosing funds with low turnover I can avoid those high-priced MBA's foolishly (little f) trying to time the market. I do however anticipate going back to indexing for my 2003 Roth.

your mileage may vary...

j

I like your idea about Dodge & Cox. I have been doing my own research on it and like it very much. I think I will be opening an account with them as well. Also I am still chugging along with my fairly new VFINX dollor cost averaging.