ExperiencedNewbie said:My mom is looking to invest her tax return into an IRA with WAMU. It's not a lot, only $4k and she has a short horizon time of 6yrs before she retires. I'm looking for the hottest mutual fund or expect incredible returns but something that's respectable like the 8%.

My first thought was index fund and then vanguard since they have low expense ratios.

Any inputs? Is WAMU a good place and is Vanguard's 500 Index a good choice?Just because your mother will retire in six years doesn't necessarily mean her time horizon is just six years. It is if she'll have very little income and will need to preserve every penny, in which case she should avoid any stock fund and instead stick FDIC-insured bank accounts or CDs (never invest in a CD through a broker!) or a money market mutual fund (not to be confused with bank money market accounts, which are different). But if she'll have an adequate pension and can afford to lose lots of money in an investment, maybe a stock mutual fund is suitable for her. There are more conservative funds, such as equity-income funds (they invest in high-dividend stocks), balanced funds (they hold both stocks, usually conservative ones, and bonds), and target funds (several funds in one, targeted toward different retirement years, and the ones aimed at earlier years are more conservative than those with longer target dates.

If your mother wants a mutual fund IRA, then it's best to invest directly with the fund company because places like WAMU offer only load funds, which charge sales comissions.

larrymoencurly said:ExperiencedNewbie said:My mom is looking to invest her tax return into an IRA with WAMU. It's not a lot, only $4k and she has a short horizon time of 6yrs before she retires. I'm looking for the hottest mutual fund or expect incredible returns but something that's respectable like the 8%.

My first thought was index fund and then vanguard since they have low expense ratios.

Any inputs? Is WAMU a good place and is Vanguard's 500 Index a good choice?

Just because your mother will retire in six years doesn't necessarily mean her time horizon is just six years. It is if she'll have very little income and will need to preserve every penny, in which case she should avoid any stock fund and instead stick FDIC-insured bank accounts or CDs (never invest in a CD through a broker!) or a money market mutual fund (not to be confused with bank money market accounts, which are different). But if she'll have an adequate pension and can afford to lose lots of money in an investment, maybe a stock mutual fund is suitable for her. There are more conservative funds, such as equity-income funds (they invest in high-dividend stocks), balanced funds (they hold both stocks, usually conservative ones, and bonds), and target funds (several funds in one, targeted toward different retirement years, and the ones aimed at earlier years are more conservative than those with longer target dates.

If your mother wants a mutual fund IRA, then it's best to invest directly with the fund company because places like WAMU don't offer only load funds, which charge sales comissions.

Any suggestions on some money market funds? Guess I'm getting confused with that and your typical index mutual fund.

SimpleMoney said:Does it really matter? $4k isnt going to help her retire in 6 years. Thats going to be like 2 months living expenses. The best you are likely going to do is turn it into $10k and the worst you are going to do is turn it to $0. Either way its not going to help her much. Maybe she could get a time machine and start her retirement savings in her 20s instead of 60s.

wow, what a freakin' ass, did your mom not love when you were little? Or was it your dad who gave you too much lovin'? The time machine would prob. serve you better so you wouldn't have to turn out the way you are.

ExperiencedNewbieAny suggestions on some money market funds? Guess I'm getting confused with that and your typical index mutual fund.[/Q said:Generally, the lower the expense ratio, the better, because money funds of any type (type mostly means tax status -- fully taxable, state tax exempt, federal tax exempt, completely tax exempt) all invest in the same things, meaning profits depend almost exclusively on how little is taken out by expenses. BTW there's no benefit to using a tax-exempt fund in an IRA.

For safety, some experts recommend that money funds be rated AAAm by Standard & Poor's (some money funds try to boost yields by making riskier investments rather than charge lower expenses), have no investments comingled with those of an institutional money fund (they're considered riskier than retail funds, and, unlike the latter, have lost money at times), and hold at least $1B in assets.

Some other things to consider are the minimum required account balance, charges for dipping below the minimum (usually assessed only once a year, not every month as with bank accounts), and minimum investment and withdrawl amounts. And for nonretirement money market fund accounts, look at check-writing policies (minimum amounts -- usually $100-500, charges for bounced checks, how cancelled checks are handled -- returned or images available).

iMoneyNet.com has information about money funds, as does Morningstar.

It depends on her overall asset allocation. If she doesn't have one right now, that's much more important than deciding on some arbitrary fund. She should read a book like "A Random Walk Down Wall Street" or "All About Asset Allocation".

Isn't this a variation of:

1. Q: What do I do / where do I invest $xxxx amount of money for XXX time?
A: See Bycracky's The "What do I do with $XX,000 question?" we love to hate thread!
Presidential, ING Direct, VirtualBank and many others all offer good rates that are usually much higher than local banks.
See the FAQ The Daughter of The Mother of All Online Banking, Checking, Saving, and Money Market, Interest Rate Threads.