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Author: scwrigh2 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75532  
Subject: Roth IRA Splits Date: 11/22/2013 2:57 PM
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I am 24 years old and I am about to invest $5,500 in a Roth IRA by the end of this year. Does anyone have some suggestions on what to invest in for my Roth IRA? IE: A break down by percentage of each of the items you suggest investing in.

Thank you!
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Author: joelxwil Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73800 of 75532
Subject: Re: Roth IRA Splits Date: 11/22/2013 3:30 PM
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With that amount of money, I would suggest a good mutual fund. I got out of mutual funds some time ago and went into stocks, so I have not been following the performance of mutual funds. When I was doing that, I used a good charting and graphing software package (Fasttrack) to look at the performance of mutual funds and then to monitor the ones I had, comparing then with the averages and other mutual funds. While mutual funds do not, in general, beat the averages, careful selection and trading of mutual funds did allow me to do better than most of the averages. The fund managers do not like you to ever sell their funds, but if they want you to stay with their fund, they should learn to perform better. I do not recommend active trading of mutual funds, but generally a minimum 90 day hold works out OK.

When the market is performing well (generally speaking) the small caps outperform the rest of the market. So another alternative is just to buy IWM when the market is going up. IWM is traded very well (but not perfectly) by the (8,55) moving average crossover. That is very simple, and gets you about 10% per year. Also, you miss the major draw-downs.

I would not trade individual stocks with that amount of money. Other people may have other ideas, but I think that to trade individual stocks you should have at least about $100,000 distributed over 10 stocks.

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Author: whafa 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: 73801 of 75532
Subject: Re: Roth IRA Splits Date: 11/22/2013 3:36 PM
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I am 24 years old and I am about to invest $5,500 in a Roth IRA by the end of this year. Does anyone have some suggestions on what to invest in for my Roth IRA? IE: A break down by percentage of each of the items you suggest investing in.

Thank you!


That's a very personal decision for you to make, and the subject of just about every investment discussion that happens on this website, but whatever you decide, keep in mind that you have until Monday, April 15, 2014 to fund the account for 2013.

https://www.fidelity.com/retirement-ira/ira/contribution-lim...

As far as what to invest in, you are young enough to be aggressive. I will tell you that when I was your age, I used my Roth IRA contributions to speculate with all kinds of options and individual stock picks. That was, lord, 2000 and 2001, and I lost all of that money. Not a big deal in your early 20s, but if I could give you one piece of wisdom from my last 12 years of investing, it would be, "get rich slow."

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Author: AngelMay 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: 73802 of 75532
Subject: Re: Roth IRA Splits Date: 11/22/2013 3:56 PM
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Other people may have other ideas, but I think that to trade individual stocks you should have at least about $100,000 distributed over 10 stocks.


Even $100,000 seems small.
I can never believe how fast it vanishes when I'm investing.
100 shares of AAPL and whoosh! You've used up more than half of it.
500 shares of this, 400 shares of that, 1000 shares of something else… and you're done - while you still have stuff on your list. :)

AM

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Author: whafa 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: 73803 of 75532
Subject: Re: Roth IRA Splits Date: 11/22/2013 4:26 PM
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Even $100,000 seems small.
I can never believe how fast it vanishes when I'm investing.
100 shares of AAPL and whoosh! You've used up more than half of it.
500 shares of this, 400 shares of that, 1000 shares of something else… and you're done - while you still have stuff on your list. :)



It won't even buy you 1 share of Berkshire Hathaway! Fortunately the number of shares you buy isn't at all important compared to the percentage of your allocation. :)

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Author: DolonAltekar Three stars, 500 posts SC1 Red Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73804 of 75532
Subject: Re: Roth IRA Splits Date: 11/22/2013 4:37 PM
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Other people may have other ideas, but I think that to trade individual stocks you should have at least about $100,000 distributed over 10 stocks.

I beg to differ. Why do you have to have $10,000 in each position? With the low brokerage commissions today (<$10 at most online brokerages) you can keep costs low and put as little as 500.00 in each position as long as you are not a trader, but a long term investor.

If you keep adding more over time, you will be able to add to those positions and eventually have 100K and more.

But until you decide to get fully into stock investing, I'd simply park it in a low cost index fund. You are 24, so no need for fixed income.

Put it all in VTI the Vanguard total stock market index fund, and forget about it for 40 years, except to add a bit more each month/year.

D.

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Author: oceanbluela Big red star, 1000 posts Old School Fool Ticker Guide SC1 Red Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73805 of 75532
Subject: Re: Roth IRA Splits Date: 11/22/2013 4:52 PM
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Hi scwrigh2,

Congratulations on being so smart as to start a Roth at the age of 24, and to have so much to fund it. $5500 is a big chunk of money at your age and to start an IRA. I started mine with $1000, and that was 32 years ago. I started with mutual funds since at that time, it cost more to buy stocks and you had to pick up the phone and have someone make the trade for you. the Stone Age to be sure.

I disagree with the idea of mutual funds being the only way to go at your age. Or any age. If you have no interest in learning about and choosing individual companies in which to invest, index funds are the way to go. In that case, I would read up on Index Fund investing... google John Bogle which is a good place to start... and then choose a handful of Vanguard funds.

I have recommended a different course of action for my daughter and nieces and nephews. I suggest taking a one year subscription to the Fool Stock Advisor newsletter which is investing in an education about stocks. Don't expect a stodgy stiff newsletter. Like the Fool brand, the newsletters are fresh, skew young, playful, but with important and priceless information. You can read about the companies they recommend, go on their great community boards and discuss and read about every stock, or just buy a handful of stocks and check out the newsletter once a month and or not. You're young and so probably don't have enough hours in the day to get everything done. But having a Stock Advisor subscription does not have to be time consuming. You can scan and toss it, or devour it and dream about when you have more money to invest. The key thing is that over time, you'll get good advice, the Fool team does all the heavy lifting in terms of finding and analyzing their picks, and they teach you about building a portfolio for a lifetime. I went from not making much money and putting in !000 per year for some years, then my career took off and I was able some years to invest 40,000. I first read about the Fool back in 1998 and because of them, bought AOL, AMZN and SBUX, among others. This was pretty much before people had heard of them or used them. I made a lot of money, some of which I gave back to the market... AOL when it dove to the basement... but I still have those (and additionally purchased) shares of AMZN and SMUX today. If a market correction ever gives me a good price, I'd still buy more of them as they are long term holdings for me.And exceptionally well run companies. In other words, I am certain I will have them to pass down when I am gone.

I believe in educating yourself for your future investing life now. You can take a free 30 day trial to the Stock Advisor. I suggest you do it. Once you do, go onto the boards and read about some of the holdings I suggested to my daughter, nephews and nieces: Starbucks, Apple, Amazon, Disney, Google, LinkedIn, Whole Foods Market, Costco and so many others. I hold all of those companies and expect I always will. They now hold them, too. I have averaged a 19% gain per year since 2003. That is astounding, and I couldn't have done it without the Fool. I haven't bothered to go back before 2003 because I changed brokerages and lost some records that I have no interest in recreating. I think a ten year record including the horrors of the market meltdown in 2008 is a pretty good indication that the Fool has helped me to learn and feel confident in investing in the market. I now subscribe to Stock Advisor, RuleBreakers, and Supernova. But I think taking Stock Advisor out for a spin first makes the most sense. In a few years, you will probably want to try RuleBreakers, which I also love.

Personally, in your situation, I would open an account at one of the brokerages where it cost no more than 10 bucks to make a trade, and then I would buy roughly equal positions in 5 different companies. I wouldn't go crazy chasing more exciting but chancy tech companies like 3D printing companies (which I do own and find exciting, but I have lots more cash to invest than you.) I would choose 5 core positions that will be there many years down the road.

This is a huge step, and I'm very excited for you. Have fun, good luck, and please... take out a free Stock Advisor subscription. It will be the best investment you'll ever make. You can go here to read more: http://motleyfoolreview.com/stock-advisor/

Best,

Vivienne

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Author: jgc123 Big gold star, 5000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73806 of 75532
Subject: Re: Roth IRA Splits Date: 11/22/2013 5:31 PM
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I think my 28 year old daughter is in a small combination of low cost etfs - Vanguard Total World Index (VTI), a dividend aristocrat etf (VIG, sdy or schd) and maybe a utility etf like VPU.

Maybe $2K in VTI, $2K in VIG, SDY or SCHD, and $1.5K in VPU with reinvested dividends would work well.

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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: 73807 of 75532
Subject: Re: Roth IRA Splits Date: 11/22/2013 8:23 PM
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Vanguard LifeStrategy Aggressive Growth

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Author: MurrayS Big red star, 1000 posts 10+ Year Anniversary! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73808 of 75532
Subject: Re: Roth IRA Splits Date: 11/23/2013 12:41 AM
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Other people may have other ideas, but I think that to trade individual stocks you should have at least about $100,000 distributed over 10 stocks.

By that rule, I never would have purchased $4k of AAPL in '98 at a split adjusted $8/share {shrug}

Nothing wrong with buying a few individual stocks, but I tend to agree that actively trading would be a bad idea without a good base of investments.

-murray

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Author: JLC Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73810 of 75532
Subject: Re: Roth IRA Splits Date: 11/24/2013 9:43 AM
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Used to be a rule of thumb at TMF to keep commissions less than 2% (buying and selling, i.e. round trip or 1% each way). So if you spread $550 over 10 stocks, your commission would have to be $5.50 or less. So you are right on the cusp depending on who your broker is.

If you're not trying to day trade or turn over your portfolio each month or even quarter, I'd go ahead with $550 on each position assuming you'll add to those same positions next year.

Outside of that, there are several ETFs that give you a broad exposure. For example, $1375 in IVV, EFA, IYR and IEF gives you US equities, foreign equities, US REIT and US bonds.

JLC

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Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73813 of 75532
Subject: Re: Roth IRA Splits Date: 11/25/2013 2:15 AM
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Buy and hold shares of a 2060 or 2065 Target Date Fund offered by Vanguard, T. Rowe Price or Fidelity. Attempting to pick the 'best' managed mutual fund or individual stock is a fools errand.

You don't mention it, but you need to have earned at least the amount of your annual IRA contribution as wages from employment or self employment...or be married to someone who does.

BruceM

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Author: SeniorCit Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73814 of 75532
Subject: Re: Roth IRA Splits Date: 11/25/2013 10:56 AM
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It won't even buy you 1 share of Berkshire Hathaway! Fortunately the number of shares you buy isn't at all important compared to the percentage of your allocation. :)

True as far as BRKA shares, but you could buy the B shares.

In fact, just minutes ago, in a family member account, I had a buy order filled for 25 shares of BRKB for $116.48. a total of $2919.95 including commission. You could buy over 40 shares with $5000.

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Author: whafa 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: 73815 of 75532
Subject: Re: Roth IRA Splits Date: 11/25/2013 12:09 PM
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True as far as BRKA shares, but you could buy the B shares.

In fact, just minutes ago, in a family member account, I had a buy order filled for 25 shares of BRKB for $116.48. a total of $2919.95 including commission. You could buy over 40 shares with $5000.


Sure. My real point was that share price, and number of shares, is basically meaningless as long as it doesn't preclude you from buying a stock. It's much more meaningful to think in terms of percentage allocation.

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Author: mscroesus One star, 50 posts Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73816 of 75532
Subject: Re: Roth IRA Splits Date: 11/25/2013 12:58 PM
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One more opinion for our poor 24-year-old's consideration:

If you go with a mutual fund or ETF instead of with individual stocks (and I think either is fine, if well chosen), I'd suggest a fund that invests 100% in equities and 0% in fixed-income products. Either the S&P 500 or a broader-based stock fund like some of those mentioned in earlier posts would work. And I'd look for a fund with very low annual expenses, which means an index or "unmanaged" fund. I disagree with the recommendation that you look at asset-allocation ("Target Date") funds because those do entail management expenses, which could eat up more than is reasonable over the years during which you will hold your investment.

Ms C

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Author: BordLyron Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73883 of 75532
Subject: Re: Roth IRA Splits Date: 12/2/2013 8:18 PM
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I agree with Vivienne - check out MF Stock Advisor. Try what I did: sign up for the free trial, download the first 24 issues and the most recent 24 issues, then cancel your free subscription & spend a few days reading through this material. The idea here is NOT to glean stock picks, but rather to understand what this service has to offer.

When I did this, many years ago, I had much more to invest than you have, so the decision to buy a subscription was easy for me. You will have to consider the cost more carefully than I did. Perhaps tossing money into some of the low-cost index funds mentioned by others for the first year or two would give you a good foundation prior to messing with individual stocks.

I wish that I had begun this whole process when I was your age. I would probably be retired today. Good luck.

Byron

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