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Author: slherzberg Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75381  
Subject: Why buy and Index Funds for IRA through a discou Date: 3/15/2002 3:44 AM
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In the Fool's advice for setting up an IRA, it is stated that one of the 1st things to be done is to set up an account with a discount broker. Then, it is recommended that a significant portion of the investment be with the Vanguard 500 Index Fund. Why isn't it more practical to buy into the Fund directly from Vanguard? This way, the transaction fee charged by the broker can be avoided. Furthermore, if the account is opened with $5,000 of more, Vanguard waives $10 a year custodial fee.
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Author: BookmFool Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 33993 of 75381
Subject: Re: Why buy and Index Funds for IRA through a di Date: 3/15/2002 7:57 AM
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Hello slherzberg:
In the Fool's advice for setting up an IRA, it is stated that one of the 1st things to be done is to set up an account with a discount broker. Then, it is recommended that a significant portion of the investment be with the Vanguard 500 Index Fund. Why isn't it more practical to buy into the Fund directly from Vanguard? This way, the transaction fee charged by the broker can be avoided.

Very astute observation. I assume you're referring to this:
http://www.fool.com/60second/ira.htm?ref=prmpgid
On several of the message boards I've frequented, we've always thought it best to avoid a middle-man (a broker), when you can buy wholesale (from the fund company). This was done because most brokers would charge a fee per transaction to invest in funds from Vanguard and some other no-load mutual funds. Oh, most brokers have a list of NTF (No transaction fee) funds, where there is no fee to pay per purchase, but it was rare to see a Vanguard fund on one of those lists. But there is at least one discount broker I know of that now has Vanguard on their NTF list; Scottrade. But IIRC, you still have the Vanguard custodial fee to worry about too.

Anyway, you can be fee conscious, and have more than one alternative for now.

HTH

Bookm



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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: 33994 of 75381
Subject: Re: Why buy and Index Funds for IRA through a di Date: 3/15/2002 10:52 AM
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You're right.

The Fool wants you to get started with a discount broker because they get a finder's fee if you sign up with one of the discount brokers they recommend.

And also because the point of the Fool is to teach you how to pick your own stocks.

The Fool's line has been "If you're just starting and don't know anything, you can't go wrong with the S&P500. But eventually you'll want to be picking your own stocks so you can beat the market." I don't think this advice is totally solid.

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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34009 of 75381
Subject: Re: Why buy and Index Funds for IRA through a di Date: 3/18/2002 4:48 PM
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, "it is stated that one of the 1st things to be done is to set up an account with a discount broker. Then, it is recommended that a significant portion of the investment be with the Vanguard 500 Index Fund."

In beginning to invest, one of the first things to do is set up an account with a discount broker.
I agree that mutual funds should be held with a mutual fund company, and Vanguard stands alone in low fees. Furthermore, index funds are quite tax-efficient because there is little turnover. Therefore, there are two levels of tax avoidance in having an index fund in an IRA.
My advice would be to begin investing with an index mutual fund in a taxable account with the mutual fund. Then set up an IRA and think about what you want to put into it. You can start with a stock you'd like to hold onto for a long time. The next year, add a different stock. In a few years you have a portfolio. You are limited in how much money you can put into your IRA, but you are not limited as to how much you might invest in an index fund in a taxable account.
Best wishes, Chris

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Author: bigcaat Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34033 of 75381
Subject: Re: Why buy and Index Funds for IRA through a di Date: 3/24/2002 2:01 AM
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Why isn't it more practical to buy into the Fund directly from Vanguard?

It is. Go direct to Vanguard.

Caat

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