No. of Recommendations: 11

You wrote, I am currently unemployed. I have about $22000 invested in a 403b that is terminating by the end of this month. So I desperately need help in deciding where to rollover my retirement fund . TdAmeritrade has offered a no-fee Traditional IRA but my money would rollover into just one mutual fund. What are the disadvantages of just one mutual fund? Am I setting myself up for a trap? With my 403b I had 5 mutual funds.

I'm pretty sure a TD Ameritrade IRA has WAY, WAY more than 5 mutual funds available. Here is today's list of NTF (No Transaction Fee) open-ended mutual funds offered by TD Ameritrade. This list changes frequently and can be pulled from TD Ameritrade once you have an account. However, TD Ameritrade offers literally thousands of other mutual funds that will only cost you a transaction fee when you add new money or sell out.

It's unfortunate you have only $22K to roll over as TD Ameritrade will add $100 to your account if you roll over at least $25K in new funds.

TD Ameritrade is an excellent general-purpose discount broker. However, not every investor needs a general-purpose discount broker. If you can answer yes to any of these questions, you might need one yourself: Are you planning to own shares of a publicly traded company? Do you intend to buy shares of an ETF or CEF? Do you intend to buy bonds, Treasuries or exchanged-traded debt? Are you considering stock options either for investment hedging or speculation and/or leverage? Do you plan to buy Futures contracts? Are you thinking of trading currencies on the Forex exchange?

If the answer is no and you only want to invest in mutual funds, you might want to just create a rollover IRA account directly with a mutual fund company. Vanguard, Fidelity & T. Rowe Price come to mind. They all have a broad range of product offerings with relatively low cost of ownership.

When I opened my first rollover IRA, mutual funds were about the only low-cost option available to new investors. But that is no longer the case. Even with only $22K, if you are careful you can invest directly with a discount broker and have no more expense than you would find in a mutual fund company. In fact it might be the cheapest route.

Take TD Ameritrade as an example. TD Ameritrade offers over 100 ETFs (Exchange-Traded Funds) that have no transaction fee (if you follow their trading guidelines). Most of these funds have lower expense ratios than their mutual fund counterparts and they will perform just as well. What's more, TD Ameritrade being a proper broker, will let you re-invest any dividends from those ETFs, allowing the purchases to grow instead of having the cash from the dividends sit around un-utilized.

If you're going the brokerage route, beyond TD Ameritrade you might want to consider E*Trade, Scottrade, Fidelity and a host of others. (Though I doubt TD Ameritrade will disappoint you.) To help you decide, you might want look at the Smart Money Magazine annual survey:

BTW, there are separate boards for discussing both retirement planning and discount brokers ... not that I mind answering here.

- Joel
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