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Author: CSDunford Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75777  
Subject: Roth IRA for son Date: 7/6/2005 5:06 PM
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My son is 19 and I would like to start a Roth IRA for him since he has earned income. I'd really like to find something with low fees and a low ($1,000 or so) initial investment amount. Since he'll have this for 40 years or so, the fees paid will make a huge difference and I'd like to keep them as low as Foolishly possible. I was looking at the Fidelity Spartan US Equity Index Fund (0.10 fees), but the initial investment is a little high at $100,000. Not real good for an IRA. Any suggestions?
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Author: foolazis Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46777 of 75777
Subject: Re: Roth IRA for son Date: 7/6/2005 5:16 PM
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How about Vanguard? I am looking at them for my wife's Roth.

foolazis


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Author: Fuskie Big funky green star, 20000 posts Top Favorite Fools Old School Fool Ticker Guide SC1 Red Winner of the 2010 Rule Breakers Challenge Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46778 of 75777
Subject: Re: Roth IRA for son Date: 7/6/2005 5:29 PM
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Scottrade and avoid the Vanguard account maintenance fees.

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Author: wcfenton Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46779 of 75777
Subject: Re: Roth IRA for son Date: 7/6/2005 5:53 PM
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My son is 19 and I would like to start a Roth IRA for him since he has earned income. I'd really like to find something with low fees and a low ($1,000 or so) initial investment amount. Since he'll have this for 40 years or so, the fees paid will make a huge difference and I'd like to keep them as low as Foolishly possible. I was looking at the Fidelity Spartan US Equity Index Fund (0.10 fees), but the initial investment is a little high at $100,000. Not real good for an IRA. Any suggestions?
----------------

The "Target Retirement Funds" are something I would look at if it were my son. Probably the Target Retirement 2045 (VTIVX):

http://flagship4.vanguard.com/VGApp/hnw/content/Funds/FundsVanguardFundsTargetOverviewJSP.jsp?Entry=fndspoton82962

Your son has a smart father!

Regards,
Bill


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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: 46780 of 75777
Subject: Re: Roth IRA for son Date: 7/6/2005 5:58 PM
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open a no fee ira brokerage account and buy VTI or IVV-- you pay a commission to buy but the fees are low

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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46783 of 75777
Subject: Re: Roth IRA for son Date: 7/6/2005 9:39 PM
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Two choices:

1. If you can only put $1000 into it then go with SLASX. Selected Funds American Shares is a great actively managed mutual fund.

2. If you can put $2000 into it then go with Bridgeway Funds Large Cap Index, I can't remember the symbol.

buzman

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Author: Chattown Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46784 of 75777
Subject: Re: Roth IRA for son Date: 7/6/2005 10:08 PM
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I'm not quite sure why, but I'd take a look at the Alpine Funds, particularly the American Real Estate (EUEYX). It's pretty aggressive, and some good eary year returns might spark the same interest in you son that you have. My 17 year old is considering investing in this fund (his earned lawn mowing money) because that's where I've got his education funds.

Cheers!

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Author: CSDunford Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46786 of 75777
Subject: Re: Roth IRA for son Date: 7/7/2005 9:06 AM
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Thank you all for the suggestions. I'll look at some of these funds you mentioned and the expense fees and see what we can decide on.

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Author: 2old4bs Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46787 of 75777
Subject: Re: Roth IRA for son Date: 7/7/2005 1:18 PM
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but the initial investment is a little high at $100,000. Not real good for an IRA. Any suggestions?

I noticed this footnote on Fidelity's website for this fund:

"Shareholder will be given 30 days' notice to reestablish the minimum balance if fund balance falls below $2,000($500 for retirement accounts)."

I would call Fidelity to confirm what the minimum balance in this fund is for an IRA (minimum balances and initial investments are often different for IRAs, but Morningstar doesn't distinguish them).

Or you could open an IRA with Vanguard and put the $1000 in VTSMX (expense ratio of .19). The combined fund and IRA fees should run about $20/year

2old


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Author: PayingFool Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46788 of 75777
Subject: Re: Roth IRA for son Date: 7/7/2005 2:53 PM
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According to Morningstar's Purchase Information section, Fidelity Spartan U.S. Equity Index (FUSEX) has an the initial investment minimum for IRAs of only $2500. The minimum for additional IRA contributions is $500.




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Author: arizonacat56 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46791 of 75777
Subject: Re: Roth IRA for son Date: 7/7/2005 4:29 PM
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Scottrade and avoid the Vanguard account maintenance fees.

If you use Scottrade, you will incur a $17 charge every time you buy and a $17 charge every time you sell. This charge gives you no value and can add up to a huge amount. Cut out the middleman. You can buy directly through most no load mutual funds for no charge. If you want to buy through a broker, there are some that don't charge for mutual funds.
As far as a specific fund, check the mutual fund discussion board for ideas. You might also go to your local library and look at recent issues of Money Magazine. They often suggest specific funds and list reasons to buy.


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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: 46792 of 75777
Subject: Re: Roth IRA for son Date: 7/7/2005 5:10 PM
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Author: CSDunford | Date: 7/6/05 5:06 PM | Number: 46776
My son is 19 and I would like to start a Roth IRA for him since he has earned income. I'd really like to find something with low fees and a low ($1,000 or so) initial investment amount. Since he'll have this for 40 years or so, the fees paid will make a huge difference and I'd like to keep them as low as Foolishly possible. I was looking at the Fidelity Spartan US Equity Index Fund (0.10 fees), but the initial investment is a little high at $100,000. Not real good for an IRA. Any suggestions?


I did exactly the same thing for my 17 year old son in 1998. I opened a Roth IRA at E*Trade, and invested the max amount each year in the E*Trade S&P 500 Index Fund, ETSPX, so the total is now up to about $25,000. It would have been nearly double that if not for the severe bear market from 2000 - 2002, but those are the breaks of the investing game.

If I were doing the same thing today, I think I would go with Vanguard and use one of their Life Cycle funds like VTIVX (Target Retirement 2045). The primary reason is that once I back away from it, and he takes it over, he will not have to make any decisions about how to invest it, unless he wants to. If he just leaves it alone, it will be on autopilot until he retires.

From the Vanguard website:
Vanguard® Target Retirement® 2045 Fund invests in other Vanguard® mutual funds using an asset allocation strategy designed for investors planning to retire in or within a few years of 2045. The fund's asset allocation will become more conservative over time. Within five years after 2045, the fund's asset allocation should be similar to that of the Target Retirement® Income Fund. The underlying funds are:

Vanguard® Total Stock Market Index Fund
Vanguard® Total Bond Market Index Fund
Vanguard® European Stock Index Fund
Vanguard® Pacific Stock Index Fund

The fund's indirect stock holdings consist substantially of large-capitalization U.S. stocks and, to a lesser extent, mid- and small-cap U.S. stocks and international stocks. Its indirect bond holdings are a diversified mix of investment-grade taxable U.S. government, U.S. agency, and corporate bonds, as well as mortgage-backed securities, all with maturities of more than 1 year.

Russ

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Author: AZFooFighter Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46794 of 75777
Subject: Re: Roth IRA for son Date: 7/7/2005 8:56 PM
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I'd go with index funds from Vanguard. I've been doing this since I was eighteen and have had nothing but great service from them. Despite my meager account balances and my age, I was treated with as much respect as a large net worth investor.

Vanguard only charges $20 per year per fund. This includes a $10 fee deducted from dividends and a $10 custodial fee (which you can pay rather than have it deducted). All brokerages will charge a custodial fee for IRAs because of the paperwork they have to do. Vanguard offers some of, if not the, lowest cost index funds in the country. Index ETFs will most likely eat up more money than a mutual fund due to trading fees.

Best of luck to you and your son. I owe my dad a huge thanks for getting me started when he did. Your son will be a thousand times better off with you guiding him down the right road now. Cheers!

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Author: SirTas Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46795 of 75777
Subject: Re: Roth IRA for son Date: 7/7/2005 9:02 PM
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All brokerages will charge a custodial fee for IRAs

I don't think this is true. (I don't think Scottrade charges a custodial fee.) But even if the original statement were true, isn't the fee waived if the balance reaches a certain level?

--SirTas

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Author: becketsmom Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46796 of 75777
Subject: Re: Roth IRA for son Date: 7/7/2005 9:31 PM
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I was just at Sharebuilder... I didn't read it too carefully, but they said something about a no-fee IRA. If that's the case, you can just pay $4 one time to buy an ETF. But, there may be a minimum balance requirement for that.

I know TRowePrice will let you open an IRA with a $50 automatic monthly investment from your checking account. Perhaps you can see if there's a way to dole out $1000 between now and 4/15/06? Check with TRowe to see if you can just get it to $1000 and leave it there.

Even if you have to write a check for $10 or $25 once a year, it would be worth it because that $1000 will have a few extra years to build. And, the account fee is not counted as an IRA contribution - you just write a seperate check.

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Author: Fuskie Big funky green star, 20000 posts Top Favorite Fools Old School Fool Ticker Guide SC1 Red Winner of the 2010 Rule Breakers Challenge Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46798 of 75777
Subject: Re: Roth IRA for son Date: 7/7/2005 10:01 PM
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If you use Scottrade, you will incur a $17 charge every time you buy and a $17 charge every time you sell.

If you are investing for the long term, a buy and hold strategy is not going to be very expensive. On the other hand, those account maintenance fees will add up as it will take years to get past the minimums.

Fuskie
Who thinks you need to look at the overall fee picture...

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Author: Fuskie Big funky green star, 20000 posts Top Favorite Fools Old School Fool Ticker Guide SC1 Red Winner of the 2010 Rule Breakers Challenge Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46799 of 75777
Subject: Re: Roth IRA for son Date: 7/7/2005 10:03 PM
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All brokerages will charge a custodial fee for IRAs because of the paperwork they have to do.

Not Scottrade. There are no account maintenance fees period, low equity commissions, and the lowest non-NTF fund transaction fees of a full brokerage.

Fuskie
Who is just suggesting you check it out...

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Author: arizonacat56 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46810 of 75777
Subject: Re: Roth IRA for son Date: 7/8/2005 7:15 PM
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If you use Scottrade, you will incur a $17 charge every time you buy and a $17 charge every time you sell.

If you are investing for the long term, a buy and hold strategy is not going to be very expensive. On the other hand, those account maintenance fees will add up as it will take years to get past the minimums.


Many firms don't have mainenance fees. So why not use a firm with no mainenance fee and no mutual funds fee?

In an IRA it is very important to be keep the fees down.
If you invest monthly in one no load mutual fund at Scottrade, you are going to be paying $204 a year for nothing. That is per mutual fund! If you were to diversify between several funds (which you should do) and only bought once a year per fund, the fee's also get big. Making only one buy in each of five mutual funds, you would pay an extra $85 to Scottrade. Don't let them blind you with "No maintenance fee". They make lots of money on the transaction itself. Buying mutual funds through Scottrade just doesn't make sense.

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Author: ziggy29 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46811 of 75777
Subject: Re: Roth IRA for son Date: 7/8/2005 8:25 PM
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>> In an IRA it is very important to be keep the fees down.
If you invest monthly in one no load mutual fund at Scottrade, you are going to be paying $204 a year for nothing. That is per mutual fund! If you were to diversify between several funds (which you should do) and only bought once a year per fund, the fee's also get big. Making only one buy in each of five mutual funds, you would pay an extra $85 to Scottrade. Don't let them blind you with "No maintenance fee". They make lots of money on the transaction itself. Buying mutual funds through Scottrade just doesn't make sense.
<<

Some of this may be fine and good, but for full disclosure you should mention that you have a rather well-chronicled personal vendetta against Scottrade.

#29

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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: 46823 of 75777
Subject: Re: Roth IRA for son Date: 7/11/2005 2:28 PM
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If you are investing for the long term,

If you are investing in an IRA, you really should make a purchase each year in order to have your money invested as long as possible.

So with Scottrade it's $17 a year, or with Vanguard it's $20 for the first year, and then $10 for the next 4-5 years, and then free.

Who thinks you need to look at the overall fee picture...

I totally agree, but look beyond the first year costs.

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Author: IndecisiveFool Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46824 of 75777
Subject: Re: Roth IRA for son Date: 7/11/2005 2:35 PM
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If you are investing in an IRA, you really should make a purchase each year in order to have your money invested as long as possible.

So with Scottrade it's $17 a year, or with Vanguard it's $20 for the first year, and then $10 for the next 4-5 years, and then free.


You could decrease your costs by purchasing an ETF that mimics the particular index fund.

IF


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Author: arizonacat56 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46865 of 75777
Subject: Re: Roth IRA for son Date: 7/13/2005 8:17 PM
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So with Scottrade it's $17 a year, or with Vanguard it's $20 for the first year, and then $10 for the next 4-5 years, and then free.

Correct on Vanguard, not correct on Scotrrade. Scottrade is $17 per trade for mutual funds, not $17 per year.

I saw on CNBC that the average investor does 6 (or maybe it was 9 - I forget which) trades a year. So, let's do the math:
6 x $17 = $102 at Scottrade
6 x $0 + $20 = $20 first year at Vanguard
6 x $0 + $0 = $0 at many no load mutual funds

I should disclose that I had accounts at Scottrade and I closed most of them due to lousy service and high fees. I have some mutual funds directly with Vanguard and I like them. I also have mutual funds directly with other fund families and pay no buy or sell fees with them.

I don't see why anyone would want to pay the extra fees that Scottrade charges, when you can buy the same fund directly through the fund and pay no fee.




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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46866 of 75777
Subject: Re: Roth IRA for son Date: 7/13/2005 8:54 PM
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arizonacat56:

<<<<So with Scottrade it's $17 a year, or with Vanguard it's $20 for the first year, and then $10 for the next 4-5 years, and then free.>>>>

Correct on Vanguard, not correct on Scotrrade. Scottrade is $17 per trade for mutual funds, not $17 per year.

I saw on CNBC that the average investor does 6 (or maybe it was 9 - I forget which) trades a year. So, let's do the math:
6 x $17 = $102 at Scottrade
6 x $0 + $20 = $20 first year at Vanguard
6 x $0 + $0 = $0 at many no load mutual funds "

You left out an important portion of the OP's post:

"If you are investing in an IRA, you really should make a purchase each year in order to have your money invested as long as possible."

While your math is accurate, OP was discussing a single lump sum contribution and a single purchase per year. OP's math holds WRT to his actual suggestion. IIRC, we are talking about Vanguard Index fund, so reference to average investor making 6-9 trades per year is not applicable.

Regards, JAFO


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Author: IndecisiveFool Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46867 of 75777
Subject: Re: Roth IRA for son Date: 7/13/2005 9:02 PM
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Correct on Vanguard, not correct on Scotrrade. Scottrade is $17 per trade for mutual funds, not $17 per year.

Actually, correct for the post you are responding to. jrr7 said one trade per year in the first sentence that you conveniently dropped. One trade per year at $17 per trade equals $17.

I don't see why anyone would want to pay the extra fees that Scottrade charges, when you can buy the same fund directly through the fund and pay no fee.

Personally, I only use Scottrade to purchase individual stocks.

IF

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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: 47040 of 75777
Subject: Re: Roth IRA for son Date: 7/25/2005 2:13 PM
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I'm 25 and would suggest going directly with Vanguard. I have an account with Scottrade where I opened up my Roth last year, but since they did implement fees for Vanguard funds, which they didn't initally, I've switched to Vanguard itself (not in a brokerage account) and I couldn't be happier. Their website is very userfriendly and once you input your info future purchases are very easy to do. FYI, I've started with VTSMX. Might diversify my IRA holdings later on but for now I'm content.

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