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Unfortunately, the minimum initial investment for the fund is 25K. That goes for an IRA fund too. Being that there is a 2K limit on your contribution, how does this work? Does the remaining 23K get diverted into some other non-IRA account?

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This is my 250th post, so I'd better make it good. :)

You don't mention the Vanguard fund that you're looking into, but there are plenty of excellent Vanguard funds that require only $1000 minimum intial investment for a Roth. Two of the better core funds are: VTSMX (Total Stock Market Index) and VFINX (500 Index.)

If any of that 25k is in another retirement account, you may be able to roll it over into your Roth...assuming you are eligible. If not, you will be charged some fees for a low-balance until you hit $5000. ($10,000 if your in an index fund.) See my post on fees at:

http://boards.fool.com/Message.asp?mid=14988801

But since you have that extra money, you wouldn't have to pay those fees for long. You could put your 2k in this year (assuming you're eligible, since you don't have that income...I don't know about that) and then next year, the limit raises to 3k. So you've erased your custodial fee right there.

Now, what about that 25 grand? First and formost, do you have an emergency fund? That should be your top priority. You should have at least 3-6 months of living expenses socked away in a money market fund. (Vanguard's Prime MMkt comes to mind.) So you may want to, maybe, split that money up between your emergency fund MMkt, and then maybe a tax-efficient taxable account at Vanguard. If you have all of your accounts at Vanguard, you can transfer funds between them.

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If I may make some suggestions:

First, you can get a lot of Roth info at:
www.rothira.com

Secondly, I would recommend that you buy the book "Mutual Funds for Dummies" by Eric Tyson. It has some great information.

Third, there is an "Index Fund" board here that is really excellent, and very active.
http://boards.fool.com/Messages.asp?bid=100111&mid=14988801

Fourth, read and learn as much as you can, and then develop an asset allocation plan. The book I recommended will help. There's also the "Fool's School," which gives some great information about the basics of investing.
http://www.fool.com/school.htm?ref=G02A06

Fifth, in the future, give us as much info as you can about your situation, such as asset allocation plan, risk tolerance, investing timeline, funds currently owned, etc. This makes it a lot easier for us to point you in the right direction.

Welcome to the Fool.
Glad to have you here.
Hope this helps.
Caat
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