I am contributing to 401k and maxing it out as part of my employer's retirement plan. The money in the 401k is getting invested in Mutual funds. I also plan to open a Roth IRA and would like to put $5000 (max amount). I have 30 more years to retire. At this point, is it advisable for me to invest the amount in the Roth IRA in mutual funds or in stocks ?
Anonymous
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You will get a bunch of different answers to this...and that's because no one but you can really answer the question properly.
I also know this probably won't be a popular answer in "the community" because I am a professional...and this site is popular with the 'we hate professionals' crowd. But, I wanted to take the time to give you some honest and unbiased info...regardless of voting results.
The fact that you are asking the question shows that you are probably not comfortable/experienced in picking stocks...and that brings up the question... are you looking to buy stocks and hold them for the next 10-30 years+...or try to trade them like all the "hype" out there tells people they should do now?
Mutual fund investing is what I call "investing with training wheels"...you pay high fees and get diluted returns...but you have an 'element' of reduced risk...possibly...too. Also, $5,000 is what is considered "smaller amounts of money" in the professional investing world...so many "professionals" won't bother working with you or educating you either...because they're looking to "get paid"!!!
Your choices at this point are:
*Find an advisor that will work with you...based upon a growing long term relationship potential...and/or...
*Start educating yourself with various books and websites, etc. (Start learning about it)
*Pick a mutual fund or five and "diversify" your money...if you have 30+ years and will continue contributing each year...you should probably go with small cap aggressive stuff (okay, Small/Medium), especially when the market is still about 2/3 what it was and you have a long term outlook....but others will say "always diversify" (the watered down risk, remember) and tell you to buy small/medium/large funds in growth or value catagories and short/long term bond funds...etc.
*Pick one or two stocks and buy what you can with the money...but with enough shares it will actually make you money when it goes up (this is the "riskier" approach)
Either way...keep funding the company plan & as much as possible...keep feeding the Roth...then as the market recovers you can build up the "balanced" approach...but trying to make some amazing returns while the market is still full of such opportunities...is rational...especially for some young enough to have 30 years to work with....maybe, if done right...It won't take so long to reach 'retirement' afterall.
Note: There are a number of websites that you can visit and start learning on our own too...feel free to email me for them if you'd like...otherwise...I hope this helped...don't be a sheep...think for yourself.
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Anonymous
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Should I invest in Mutual funds or Stocks in a Roth IRA ?
I am contributing to 401k and maxing it out as part of my employer's retirement plan. The money in the 401k is getting invested in Mutual funds. I also plan to open a Roth IRA and would like to put $5000 (max amount). I have 30 more years to retire. At this point, is it advisable for me to...
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I am in the same boat. What I have decided to do is go ahead and do the nondeductible Traditional IRA each year. Here's why: There is a tax law on the books that, in 2010, will allow people in our situation to rollover our traditional IRAs to Roth IRAs without regard to our income level. Of course, we'll have to pay tax on any appreciation, but then the IRAs will appreciate tax-free, and any withdrawals at retirement will be tax free as well. The tax may be paid in 2010, 2011 and/or 2012.
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