Should I invest in Mutual funds or Stocks in a Roth IRA ?

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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RE:

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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Here is one thing to keep in mind about the Roth IRA account. There is never any tax on it where as there is on your 401k. This becomes important when considering your asset mix. Income producing investments are taxed at the full tax rate as will be your 401k. Hence it makes sense to invest at least some of your 401k in income producing assets--bonds, LPs, REITs. The income from each of those is taxed at the full tax rate anyway. Now since the Roth IRA is never taxed, it also makes sense to put those types of assets into the Roth IRA also. And also equity investments.

What you neglected to mention are investments outside of these two vehicles. If you have some, they should be investments that would be taxed at the capital gains rate--equity investments. Actually, unless you are in the highest tax bracket it makes sense to have a portion of your equity investments outside of a 401k. By doing so your total tax bill will be decreased, especially if you are a long term investor.

If you have the least hankering to invest some of your money in gold and silver those absolutely should be within a Roth IRA. Both are taxed as collectibles otherwise.

Another thing to consider in regard to the 401k is that in future years the tax rate might actually be higher, perhaps much higher, than it currently is.

Since you really have no choice of placing non-mutual fund investments within a 401k except for perhaps company stock, it certainly does make sense to invest Roth IRA money in company stocks rather than mutual funds. But be careful. It is very tempting for many to speculate with their Roth IRA account especially short term trading which otherwise would be taxed at the full tax rate. That would be a good way to reduce that value of the Roth account. Be just a little cautious. Invest in the likes of MCD, WMT, JNJ, BDX, KO, etc. Or maybe ETP with its 8% dividend or PAA with its 7.5% dividend. And do not invest it in fewer than 5 different companies.

Depends on your investment philosophy or risk levels. Individual stocks are more risky since your only own a few individual stocks compares to mutual funds that in general have over 100 equities or stocks in their portfolio and give you divisification and management expertise.

Overall, the safe move is to invest in a good mutual fund unless you know how to pick great and safe stocks. You may want to do a combination of both for instance buy one stock and with the rest buy a mutual fund. Good luck!

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Good luck.