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Author: puterlady Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76420  
Subject: Roth; too many choices! Date: 8/22/2001 10:00 PM
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I am hell-bent on getting a Roth IRA going this year.
I've spent hours everyday at a variety of sites, running a variety of "fund chooser" tools, and I'm still really overwhelmed by all the choices out there!

I have to laugh a little, because the Foolish advice on one of the Fool School pages simply states, "pick one"! (paraphrasing, of course...)

Should I just go with one of the "TOP 10" or what?

I do have some criteria set in my mind in terms of risk, but I don't know if I should be looking at brokerage firms (ameritrade, etrade, et al), or investment companies directly (Fidelity, etc.) What are the pros and cons of either? I need something that will allow payroll deduction, so I don't want to fuss, at least in the beginning. I just want to find a fund, and get my $2k into it each year.

I think my head is going to explode from information overload!

any tips on getting my spinning wheels unstuck?
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Author: Charlie48K Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 31573 of 76420
Subject: Re: Roth; too many choices! Date: 8/22/2001 10:39 PM
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I do have some criteria set in my mind in terms of risk, but I don't know if I should be looking at brokerage firms (ameritrade, etrade, et al), or investment companies directly (Fidelity, etc.) What are the pros and cons of either? I need something that will allow payroll deduction, so I don't want to fuss, at least in the beginning. I just want to find a fund, and get my $2k into it each year.

If you want the minimum fuss, then go with a mutual fund. Most have automatic payroll contribution options, while brokers are a little more complicated to set up an automatic plan. With the brokerage I have, I automaticlly deposit to a cash account and then have to direct the buys. With a mutual fund the buy is automatic. I'm not sure, but I believe Fidelity has loads. I'd pick a good no load fund. Vanguard and TIAA-CREf has ben getting a lot of recommendations. There's other good ones though. Check with the Mutual Fund discussion group. I'd recomend a stock index like the S&P 500 or, in my opinion, the Wilshire 5000 to start. Look for a fund with minimal administrative charges for small accounts.

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Author: cdr46 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 31577 of 76420
Subject: Re: Roth; too many choices! Date: 8/23/2001 1:21 AM
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"I am hell-bent on getting a Roth IRA going this year.
I've spent hours everyday at a variety of sites, running a variety of "fund chooser" tools, and I'm still really overwhelmed by all the choices out there!"

It's called information overload and in my opinion, the industry likes it that way. Too many choices leads to obfuscation and the perceived need for "professional" help.

Don't get me wrong - I think a good stockbroker or professional insurance agent is worth their price. But, in my opinion, if fees and commissions concern you, and you are somewhat intelligent you can do just as well or better than the "pros".

Review my post at http://boards.fool.com/Message.asp?mid=15590718
Re: Late Start Retirement Planning
Correction to book list -book by Mr. O'Neill is:
How To Make Money In Stocks", by William O'Neill

One more book I highly recommend is:
"Retire Early", by John F.Wasik (all of his books are excellent)

TMF has some excellent advice although at times it seems they go on forever with amusing anecdotes instead of getting to the heart of the matter.

The books and web links I recommend, in my opinion, cut to the chase.

You don't have to read every book and surf every web link prior to making a decision to open a ROTH.

Some questions you need to address are:
1) Do you consider yourself a passive or take charge person?
2) Do you intend to pick individual stocks or stay with passive mutual funds once your IRA reaches a sizable amount?
3) Do you understand the difference between a ROTH and a regular IRA?
4) Does your company offer a retirement plan and if so are you participating in it?
5) How old are you?
6) Do you plan on retiring at age 65 or earlier?

The longer you wait the harder your savings are going to have to work.

Remember that - everything else being equal - fees and commissions act like an anchor on long term investment results.
Example:
$2,000 invested every year for 30 years earning 12% (tax free or deferred) will grow to $540,585.21.
Adjust for the average fees and commissions from the above 12% and you end up with at least a 1.5% drag on earnings which would result in the above $2,000 growing to only $399,748.10 after 30 years.

That's a difference of $140,837.11. That should be incentive enough for you or anybody to do a little homework.

Almost all no-load mutual funds will allow you to set up an automatic draft from your bank for your IRA as well as non-IRA accounts.

You can have multiple IRAs, multiple broker accounts, etc., Of course by consolidating your accounts you will somewhat simplify your life. But by having multiple accounts you also have access to more options. There are aggregate web sites that simplifies all of this.

You can open self directed IRA accounts at many no load mutual fund companies - www.vanguard.com as well as regular discount brokers.

You can open IRA accounts directly with some solid NYSE companies, like General Electric - http://www.ge.com/.

Other companies that allow direct stock investment can be found at http://www.gefn.com/directstock/index.html . Not all companies allow you to set up IRA accounts yet, but many do.

Detractors will say: "what about diversification".
My answer: Get a copy of GE's annual report. In my opinion, GE is more "diversified" than many mutual funds. Every time I drive by Wal-Mart and see all those cars in their parking lot - I smile, because it means people are spending money, which benefits the bottom line of Wal-Mart.

Hope this helps.

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Author: puterlady Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 31600 of 76420
Subject: Re: Roth; too many choices! Date: 8/23/2001 9:38 PM
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First, thanks for all the good resources you've pointed me to! I'm learning as fast as I can here!

You said,
"Some questions you need to address are:"
"1) Do you consider yourself a passive or take charge person?"
Take charge! Eventually!:-)

"2) Do you intend to pick individual stocks or stay with passive mutual funds once your IRA reaches a sizable amount?"
For the IRA, for the most part I want to get it up and running now, and pretty much stick with "passive mutual funds" for this investment at least.

"3) Do you understand the difference between a ROTH and a regular IRA?"
Totally. A ROTH is definitely the right vehicle for me.

"4) Does your company offer a retirement plan and if so are you participating in it?"
Have been participating for 20 years in a nice little plan called "SURS", State Universities Retirement System. This is a 401k plan that matches my contributions. I will ALSO finally be getting into the 403b plan before the year is over, as well as starting the Roth IRA on my own. I've paid virtually nothing into Social Security, so I've GOT TO get my a** in gear here!! (Not that SS would save me from a retirement in poverty!)
The 403b lets us choose between 5 companies; Fidelity, American Century, TIAA-CREF, Aetna and MetLife. 3 have annuities which I DON'T want. The other two are Mutual Fund plans, and because the list of selected funds is only a couple dozen for each company, it shouldn't be nearly as hard to choose as the Roth is proving to be for me.

"5) How old are you?"
Old enough to know better than to have waited so long! 43.

"6) Do you plan on retiring at age 65 or earlier?"
Earlier would be better, but 65 is basically an acceptable age for me.

So, I've got 22 years to amass a small fortune. I don't have any credit card debt, I do own a home with a mortgage that I am paying additional principal on each month, and I've got no dependents to worry about. Next year, some good old US Savings Bonds will mature, and I'll have that money to use for some more investing at that time. Hopefully, I'll know more then than I know now.

Thanks again,
PuterLady



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Author: cdr46 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 31607 of 76420
Subject: Re: Roth; too many choices! Date: 8/24/2001 1:54 PM
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Dear PuterLady

In response to your additional information:
You say:

"Take charge! Eventually!:-)"

Definitely read:
"The Armchair Millionaire"
http://www.armchairmillionaire.com/
"The Coffehouse Investor"
http://www.coffeehouseinvestor.com/
"What Wall Street Doesn't Want You To Know"
http://www.bamservices.com/read.html
"24 Essential Lessons for Investment Success", by William J. O'Neil
http://www.investors.com/
For the IRA, for the most part I want to get it up and running now, and pretty much stick with "passive mutual funds" for this investment at least.

I like www.vanguard.com - but further information on index funds can be found at: http://www.indexmutualfunds.com/

Re: ROTH versus traditional IRA

Some people combine the two to take partial advantage of the tax deductibility of the traditional IRA. Finding the correct mix I leave to you. I don't worry about what the tax rates will be in the unknown future. Take advantage of what is offered today. Remember Congress can and has changed the tax law - often retroactively.


You write:

"Have been participating for 20 years in a nice little plan called "SURS", State Universities Retirement System. This is a 401k plan that matches my contributions. I will ALSO finally be getting into the 403b plan before the year is over, as well as starting the Roth IRA on my own. I've paid virtually nothing into Social Security, so I've GOT TO get my a** in gear here!! (Not that SS would save me from a retirement in poverty!)
The 403b lets us choose between 5 companies; Fidelity, American Century, TIAA-CREF, Aetna and MetLife. 3 have annuities which I DON'T want. The other two are Mutual Fund plans, and because the list of selected funds is only a couple dozen for each company, it shouldn't be nearly as hard to choose as the Roth is proving to be for me."

Congratulations. If you are not maxed out - do so. Any matching funds is "found" money and an instant return on your money.

You might want to seek further guidance at the following web sites:

http://www.financialengines.com/
http://www.stanford.edu/~wfsharpe/
http://www.403bwise.com/
http://www.efficientfrontier.com/

You're young and if you play your cards right you can retire well before the age of 65.

You write:
"Earlier would be better, but 65 is basically an acceptable age for me."

You are young and if you play your cards right you can retire well before the age of 65. Make sure you read the book "Retire Early", by John F. Wasik and check out this web site:

http://www.geocities.com/WallStreet/8257/reindex.html

You write:
"So, I've got 22 years to amass a small fortune. I don't have any credit card debt, I do own a home with a mortgage that I am paying additional principal on each month, and I've got no dependents to worry about. Next year, some good old US Savings Bonds will mature, and I'll have that money to use for some more investing at that time. Hopefully, I'll know more then than I know now."

You might also want to read the following books:
"Ordinary People Extraordinary Wealth", by Ric Edelman
www.ricedelman.com Read his alternative opinion about the "wisdom" of not paying down a mortgage - I agree with him
"The Millionaire Next Door", by Thomas J. Stanley & William D. Danko
"The Million Dollar Car and $250,000 Pizza", by Allyson Lewis

I would suggest that anyone who takes the time to read the above books and research the above web sites AND follows through with a PLAN OF ACTION will be successful in their financial goals - assuming they don't procrastinate.

You have the key element of investment success on your side - time.

Good Luck

cdr46
Learn to earn

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