Best Roth IRA?

Is there a "best" Roth IRA company? I keep hearing a lot about Vanguard. Right now I'm just putting in 10% (changing to 5% since I only get matched up to 5%) into 401k and want to start up a Roth IRA and max it out for the year. Is there a general consensus on which one is better than the next? I probably will be doing some fund juggling, but not on a regular basis (maybe or twice a month). I'm 25, not sure if that matters or not in this case.

Depends on what you want but if you are just investing in an index mutual fund then there is not much that beats vanguard.

mikhailtech said: What do you mean "depends on what I want"? I'm not going to be investing in individual stocks, only indexes. If I decide to trade individual stocks at some point I'll do that outside of an IRA.

He means if you want a Fidelity index fund then Vanguard is not the place for your IRA. if you want any type of specific index fund then Vanguard is the probably your best bet (if they offer that specific index) because they have some of the lowest fees. If you want a specific loaded fund then that company would be your best place.

1) Figure out which funds you want.
2) Check 3 or 4 places that offer it and decide what is the cheapest way for you to invest in it
3) See if there are minimums to invest
4) Open IRA

mikhailtech said: What do you mean "depends on what I want"? I'm not going to be investing in individual stocks, only indexes. If I decide to trade individual stocks at some point I'll do that outside of an IRA.

Vanguard is the best place to invest in an index.

The ETF may be a better deal than the mutual fund, if you are going to buy and hold with it for a while. For example, for the Vanguard Total Market Index, the regular ETF has a expense ratio of 0.07%, while the stock version has an expense ratio of 0.15%, plus the $20 fee if you don't do the electronic package or meet the minimum balance. Therefore, a Scottrade with free IRAs and $7 a trade might actually be better for larger amounts, provided you don't go and start trading (since more than one trade a year will wipe you out). For $1,000, the difference is basically 80 cents a year. ETFs also have the flexibility of purchases at the market price during the day, rather than that at the end of the day, and other nice features. I hold Vanguard ETFs in my Zecco account and some in a regular Vanguard account, and each serves its purpose.

mikhailtech said: Is there a "best" Roth IRA company? I keep hearing a lot about Vanguard. Right now I'm just putting in 10% (changing to 5% since I only get matched up to 5%) into 401k and want to start up a Roth IRA and max it out for the year. Is there a general consensus on which one is better than the next? I probably will be doing some fund juggling, but not on a regular basis (maybe or twice a month). I'm 25, not sure if that matters or not in this case.

As far as vanguard is concerned, that is fund juggling. I don't have the link right now, and I'll look for it tomorrow, but they don't want you selling and buying the same fund within 60 days I believe. If you do want to change your positions on a monthly frequency, you may have to look elsewhere, but as calwatch pointed out, with more than a trade or two a year, you will be eating into the funding money pretty heavily.

ElectricSavant said: Check out Scottrade....no fees there that I can see and you can buy what you want...

ESI have an IRA with them. Their customer service is poor and all they say is "We're a discount broke, what do you expect?" They don't know anything about IRAs. I would recommend getting an IRA somewhere else to save yourself some headaches later. Most online brokers offer free IRAs and the commission are not that much more.

I'm usually low-maintenance client too, but I wanted to do an IRA recharacterization and they were absolutely awful about it.

Vanguard is good in a way because you never have to worry about them going bankrupt really.

Vanguard is a special type of company, it's more like a credit union than a bank/brokerage. It's a subsidiary of the various funds which all have their own entities. For it to go bankrupt all its stock/bond/metal funds would pretty much have to go to 0. If that happened, you have more problems than a losing an IRA. If BAC or C goes bankrupt, it wouldn't matter much.

He is right, and he probably didn't know exactly how right he was. From here

Since VGI is actually owned and funded by the various mutual funds, it technically couldn't go bankrupt unless all of the various mutual funds that support it went bankrupt. The only way that could happen would be for the value of all of the stocks and/or bonds held by each and every individual Vanguard mutual fund to go to zero. So, forget about Vanguard going bankrupt -- it just isn't going to happen.

It's also important to point out that even if VGI were to somehow go broke, VGI has no recourse to the assets of the funds. Rather, each fund's custodian holds that fund's assets. Even the fund managers do not have custody of their fund's holdings. They simply decide which stocks/bonds to sell, and the custodian actually delivers (in the case of a sale) or takes delivery (in the case of a purchase) of the actual asset.

So, basically, if VGI (The Vanguard Group, Inc.) goes bust, that means EVERYTHING went bust, and I hope you invested in guns, ammo, and water.

Vanguard funds technically could go broke.. but if you're buying index funds, and you're diversified among them through Vanguard, then you're pretty safe. Even if Vanguard itself went bankrupt, the funds won't. Each fund is it's own entity.

Technically because of that, you're more safe buying through them than Scottrade or another broker, as you're then reliant on that broker and let's hope they don't go bankrupt of your funds may be tied up for a while.

The rule of thumb I always use is look at your goals, and the funds you're wanting to get. If you're at the majority of that particular company (for indexes anyways), go direct if it makes sense financially. Going direct to Vanguard is a good idea. They have good service and support, and they are directly vested not only into your account, but the funds, so they can help you and work with you well, and it's in their best interest to keep you there. Broker's just want you to trade. That's how they make their money. I for one would not want the bulk of my portfolio, which is my retirement funds in a brokerage account. That's where my play money is because that's all the companies are good for IMO unless it's your job to trade.. and in that case, good luck!

wow...you really need to get a life....simply posting an observation to now being incorrigible...gawd I hate this place...why can't you trolls go back in your hole?

ES

MyDiscoverSucks said: pthor1231 said: he probably didn't know exactly how right he was.

Now that's just insulting...

Do some research ES don't be incorrigible. Anyways, I didn't say don't diversify, I have a crap ton of brokerages for different uses. If Vanguard goes bankrupt it wouldn't phase me, but they're not going bankrupt any time soon. Plus it's a decent brokerage, much better than Scottrade which I think sucks.

hehe...I am fine...

ElectricTrollBusterSavant☺

MyDiscoverSucks said: calm down dont get your panties in a bunch

ElectricSavant said: I hope your right for your sake...I think diversification may be right for my sake....and never say never...but really the guy wants a broker not a company of funds...

I try not to recommend a broker to anybody and my one line post about Scottrade was simply an observation...I have several brokerage accounts for diversification...I even have a Vanguard account...along with Fidelity....the Brokerages are for ETF's and such...Scottrade is just one of them well suited for IRA's...but not for trading....Scottrade has the Lipper info...and other keen little tools for analysis that is pretty kewl too!

ES

MyDiscoverSucks said: Vanguard is a special type of company, it's more like a credit union than a bank/brokerage. It's a subsidiary of the various funds which all have their own entities. For it to go bankrupt all its stock/bond/metal funds would pretty much have to go to 0. If that happened, you have more problems than a losing an IRA. If BAC or C goes bankrupt, it wouldn't matter much.
Savants don't top post.

Fidelity has a 4-in-1 fund that invests in four different index funds. It's cheap.

It is really up to you...don't forget to indicate the tax year...

mikhailtech said: Here's kind of a noob question ... once I'm ready to fund my Roth IRA, do I just do automatic deposits into it from my bank account after I get the direct deposit for my paycheck (since it's already taxed)? Or how do I go about doing it?

sheff said: MyDiscoverSucks said: Vanguard is a special type of company, it's more like a credit union than a bank/brokerage. It's a subsidiary of the various funds which all have their own entities. For it to go bankrupt all its stock/bond/metal funds would pretty much have to go to 0. If that happened, you have more problems than a losing an IRA. If BAC or C goes bankrupt, it wouldn't matter much.
Savants don't top post.

Fidelity has a 4-in-1 fund that invests in four different index funds. It's cheap.
Which fund is this? FFIDX? That's the lowest cost 'index fund' I could find on Fidelity.

FFNOX

On an S&P Index Fund, wouldn't you be better off just buying SPY? It's better matched to the market, has lower fees than VFINX, and buys and sells like a stock.

mmarcuse said: On an S&P Index Fund, wouldn't you be better off just buying SPY? It's better matched to the market, has lower fees than VFINX, and buys and sells like a stock.

Yes and no. Liquidity isn't an issue for most retail investors. The fact that an ETF trades on an exchange isn't going to be terribly important since the typical investor doesn't need to trade it mid-day. They can wait until 4pm close of the day.

The 'yes' part of your question is true because ETFs typically have lower overall management fees, which keeps your money in your pocket, and they also have greater transparency since the holdings are published at the end of every business day. In a mutual fund, you only know what the fund was holding at the end of the quarter. So it you honestly have no idea exactly what you're buying when you get a mutual fund.

Where ETFs fail is that you incur a regular transaction fee. If you are investing $100 per month into a no-load mutual fund, there are many places where that's at no cost. All of my $100 goes right into the fund. However with an ETF, because it is exchange traded, you need to pay a brokerage your fee. So for Scottrade, for instance, you will pay $7. If you're paying $7 per month to invest $100, you're throwing away 7% of your principal. In that case, it makes little sense to go with an ETF.

While this isn't an offer to buy or sell securities, and do understand that any investment product can lose money and you run the risk of financial loss with any investment, I encourage people to look at some mutual funds and invest regularly in them. Once you amass a certain critical mass of money, say $700-1000, convert your mutual fund into the equivalent ETF. Then your transaction costs are amortized over a larger pool of money. Whereas with $100 it is 7%, if your investment is 1000 then you have a cost of .7%. That typically is more than enough savings in a year to pay for the difference in management costs.

Example: ETF has a management cost of 0.4% / year. Mutual fund has cost of 1.1% per year. You incur 0.7% cost to buy ETF vs mutual fund, but over 1 year, it pays for the difference. Plus you get greater transparency and liquidity with your fund.

Rebalancing ETFs is also more difficult than mutual funds due to transaction costs. I don't know what a good breakpoint would be, but it might be $25,000 in holdings before an ETF makes more sense.

No matter what, stick with low costs, passively managed funds that take an indexing approach. Don't waste your money with actively managed products. They do not deliver.

boglehead.com has good answers to this question -- which in short is use vanguard or wells fargo PMA account to buy vanguard or similar v. low fee index funds and etfs. And usually what you buy in your tax sheltered account like a Roth should be informed by your desired asset allocation and the fact that it is usually tax-efficient to hold securities that throw off taxable income in tax sheltered accounts such reits and bonds.

more info here: http://www.bogleheads.org/wiki/Principles_of_Tax-Efficient_Fund_Placement

and good fund/etf selections are here: http://www.bogleheads.org/wiki/Lazy_Portfolios

leedsutd67 said: schwab now beats Vanguard for lowest fees and it's only $100 to open a mutual fund

I second the Schwab beats Vanguard

http://www.fatwallet.com/forums/finance/922659/


robobert said: A quick comparison of total stock market index fund minimums and expense ratios (sorted by their minimums):

• $100 Min, 0.09% ER - SWTIX - Schwab Total Market Index
  
• $3,000 Min, 0.15% ER - VTSMX - Vanguard Total Stock Market Index (Investor)
  
• $10,000 Min, 0.10% ER - FSTMX - Fidelity Spartan Total Market Index
  
• $100,000 Min, 0.07% ER - VTSAX - Vanguard Total Stock Market (Admiral)
  
• $100,000 Min, 0.07% ER - FSTVX - Fidelity Spartan Total Market Index (Advantage)
  

Unless you have $100,000 to put in that is. But if you are 25 starting with a roth then likely you do not have $100,000 and I'd go with Schwab. Lot of good info in that thread I linked above