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Hello Foos,

I am on the way to open my Roth IRA and I decided to go directly with Vanguard. Yesterday in the evening I talked to a Vanguard representative. Even though he couldn't figure out what status box I should mark since I'm not a U.S.citizen, he was helpful with other questions.

They charge $10 for accounts if balance is below $5K. The guy said that Vanguard assesses balances in June and December. So, if by June it's still under $5K, you'll be charged 10 dollars. I'm going to mail a check of $3,010 (pre-pay the custodial fee) for 2003, and then let them automatically withdraw my money from my checking account. However, I still have to learn if I could fund my Roth IRA more until June (that way, I would reach $5K) and then decrease monthly contributions afterwards. Maybe someone of you has an idea about this.(??) So, this question was about a ROTH IRA.

Now I have some questions about opening a taxable account.

I'm torn pondering which route to open a taxable investment account. I'm interested in DODBX that I would like to buy and hold. But I am not sure if I should open an account with Scottrade or directly with Dodge&Cox. I still have time to think and maybe ask Fools' opinions since I don't intend to open this taxable account until after New Year.

Another question would be: How long does it take to have an account all set up? It seems I can open a Scottrade account on-line, but Dodge&Cox prefers an application filed via mail (which is fine with me, I have got all the forms at home). I could send the application in December, if it takes 2 weeks or so to open an account. But on the other hand, I'm afraid that they may set it up before 2004, and I don't want to have complications with my 2003 taxes. Has anyone have any insight about such a situation?

The last set of questions would be about stocks. Beforehand I must admit, I am a newbie in the arena of investing. Your info and advice/insight would be very helpful to me.
So, I am more like a Buy-and-Hold person. Therefore I was asking above if I am fine to go directly with Dodge&Cox, since I'm prone to keep that fund for a long term and make monthly contributions (unless something unexpected happens).
If I understand correctly, people who open a brokerage account all tend to trade stocks. Is this how they build a portfolio by constantly buying various stocks? Do they buy and hold the stocks or just keep trading daily or weekly?
Moreover, I haven't understood yet why tax consultants advice to sell unprofitable stocks at the end of the year in order to offset gains during that year.(??) I know that it's because of taxes. But what if that stock's price appreciates in the near future? Yeah, I agree it's impossible to guess prices of stocks, but anyway...

Thanks for everyone's input, Aida
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You ask quite a few question, Aida. I'll try them, but perhaps others will be able to fill in a few details.

On meeting the $5K minimum in your Roth, the easiest way is to wait until Jan 1. Between Jan 1 and income tax day (Apr 15) you can make a $3K contribution for 2003 and another $3K contribution for 2004. Consider making them both to exceed the minimum and avoid the fee.

On discount broker vs mutual fund company for your taxable account, it depends entirely on where you plan to invest. Your mutual fund company will usually accept your contributions for investment with no fees charged. The discount broker may charge fees for some mutual funds, but gives you a broader range of investments to choose from. You can always move the account later, but that is a hassle and often involves paying a fee. So make you choice. Are you content to buy only Dodge & Cox mutual funds for the next few years? Or does Dodge & Cox offer brokerage services? If so, compare all the fees for what you plan to do.

How long it takes to open an account usually depends on how long it takes your request and payment to reach them. Also you must certify that you have read the prospectus for a mutual fund. Sometimes they will delay until your check clears. I would say mail is the slow part. Fastest is in a local office if they have one. On line can be quick, but usually you print out the forms, fill them out, sign them, and then mail them in with the check. If you arrange electronic payment, it can probably be very quick.

The tax consequences of opening your account before Jan 1 are likely to be small. But if you are really concerned about it, wait until January. If DODBX plans to make a capital gains distribution this year, they should be able to tell you. Then you should wait until after that distribution.

A brokerage account gives you the option to buy many more investments. For example, SPY is the ticker symbol of the S&P 500 tracking stock traded on the Amex. It has a low expense ratio. So you can buy it from a discount broker at a very low fee. This fee can be less than the account mainenance fee in some mutual funds. Of course, the discount broker will charge fees for some services. You must look at the whole picture. It is not necessary to actively trade stocks to have a brokerage account.

As to account activity, some people will select one investment like a mutual fund and buy it over and over whenever they have cash to invest. Others will accumulate funds as in a money market until its large enough to buy something and then pick the most appropriate investment (or best opportunity) when their funds are large enough to minimize commissions. Others will switch back and forth between several investments to achieve desired levels of diversification. Everyone developes their own investment style. There is no one size fits all.

On selling losers at the end of the year, look at Sch D on the US Form 1040 tax form. If you have a long term gain that year, you will pay taxes at capital gains rates. If you have a short term gain you will pay taxes at ordinary income tax rates. The form allows you to deduct long term losses from long term gains and short term losses from short term gains. Hence while gains exceed losses, you reduce your income tax liability. Losses can reduce your ordinary income by only up to $3K. Larger losses must be carried forward and claimed at the rate of $3K per year in future years before you can write them off. But capital gains allow you to write them off sooner because the max is all your gains plus $3K.

If the stock appreciates in the near future, it does not matter. The sale is final for tax purposes on the date of sale. However, there is a wash sale rule that prevents you from selling and then immediately buying back the investment (or technically even a similar investment--whatever that is).

I hope that covers your questions. If not, feel free to ask again or for more details.
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Thanks for a great answer, Pauleckler!!

On meeting the $5K minimum in your Roth, the easiest way is to wait until Jan 1. Between Jan 1 and income tax day (Apr 15) you can make a $3K contribution for 2003 and another $3K contribution for 2004. Consider making them both to exceed the minimum and avoid the fee.

What a great point!! I even didn't think of this option when I called Vanguard. I will call them again to verify if it's allowed, though I believe it should be. My initial idea was to do dollar-cost averaging (did it call it correctly?), but I can wait another year to start doing it, since saving $20 in fees is also not so bad.

Yes, I would like to hold DODBX for long term at least 3-5 years and longer if I see it performs satisfactorily. I don't know if they Dodge&Cox offer brokerage services, though I was not anxious to learn either.

After I learn more about stocks and taxes, perhaps I will also opt to open a discount brokerage account.

But when I want to sell DODBX when I have an account directly with the company, are there any fees rules involved. I didn't ask such specific questions when I contacted them.

Once again, thanks for info. It was great!!
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In a cash account, most mutual fund companies will cash out any portion of your mutual fund investment at any time. Some funds do charge back end loads that become payable at that time. I am not aware of any fund that charges fees for selling.

Some do have fees for short term transactions. Some do have limits on the number or size of transactions.

And by the way, many funds offer check writing priviledges. That way, you simply write a check when you need funds. The appropriate number of shares in a designated account are sold when the check clears. This keeps your money earning while the check is in transit.

For large sums (like for a mortgage downpayment), wire transfer to your bank is usually worth the effort. The money moves quickly. You can write a check against it sooner. And you don't worry about the check getting lost in the mail.
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i had similar questions abt ira at vanguard or scottrade. i went with scottrade as they dont charge any fews for the ira itself. some charge 25$. with scottrade i can buy stocks at 7$ instead of 25$ at vanguard. also they offer funds of sevceral families like 9000 funds.

also i think i may avoid the 10$ fee with scottrade..not sure..but its only 10$ man...in 2 months ur investment can grow much more than that to offset that...

but u can surely deposit 6k$ or rather 5k$ and avoid the fee next yr.. u shud surely dollar cost avg esle u may buy high...invest regualry 2 times amonth or so..

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I'm torn pondering which route to open a taxable investment account. I'm interested in DODBX that I would like to buy and hold. But I am not sure if I should open an account with Scottrade or directly with Dodge&Cox.

I pondered the this question a couple of years ago with my wife's Roth IRA. I decided to go with Scottrade. My wife's Roth is now worth over $10,000, invested %100 in DODBX. At the first of the year, I'm going to start buying into the Vanguard REIT fund. I plan to leave all the DODBX shares alone and let them grow. Having this account at Scottrade give me the flexibility to do this.

Gup
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