SavingsTalk.com

sox

Hello, I'm currently 18 and in college right now. Unfortunately I know only little things about retirement plans. I'm currently working and would like to open a Roth IRA since my workplace does not have a 401K plan. I know that there's different directions to go through: stock, mutual funds, or CDs,etc.<br /><br />My question is, what would you recommend for me to start by? Stock market or mutual funds? and with what company? Vanguard, Fidelity, Etrade, etc? (I'm hoping to make a nice long-term growth until retirement)<br /><br />I'm afraid to do this all alone, since my parents themselves don't know anything about retirement plans. Plus the fact that my dad lost all of our savings in the stock market with no research done on the company.<br />

save123

Try Sharebuilder.com...they have a &quot;risk profile&quot; questionairre in which you answer a few questions about your age, lifestyle and comfort level when it comes to investing. They build an investment portfolio for you which you can either accept or modify at anytime. It's a good way to begin investing in a Roth until you feel more comfortable on your own.

natali

Starting a Roth IRA at your age is a good idea. I would recommend you use a mutual fund. A mutual fund will help you be diversified while starting off with a small investment amount. The companies you mentioned are great places to look at if you want to invest on your own. That means you don't want a broker or financial advisor assisting you. Which is fine because starting a Roth IRA isn't too hard to do by yourself. All the companies you mentioned has a pretty big line up of mutual funds to choose from. I would lean towards etrade if you want to do individual stock trades, but I wouldn't recommend doing that unless you have significant assets to start with and the time to research the companies.

You may want to look for a mutual fund that uses asset allocation based on your risk tolerance. These type of funds are one of the easiest to maintain. There are also some funds that are considered target maturity funds. Basically it assess how much risk you should be taking given your time horizon til retirement. It will also gradually become more conservative as your retirement comes closer. This way you don't really need to change your investments much as you get older.

kevin

Congratulations on having the maturity to recognize that it's never too early to start investing for retirement. Believe me, you'll get there much sooner than you can imagine!

There isn't enough space here to go into great detail on all of your options, but here's the bottom line, as far as I'm concerned: Invest in no-load mutual funds with a solid company like Vanguard. In general, it's very hard to beat index funds, such as their Total Stock Market Index fund, which gives you a piece of the entire stock market. It may not be as thrilling as investing in riskier products but you will very likely, over the long term, have returns that are every bit as good as most (expensively) managed funds.

At your age, I'd put about 80% of your contributions into their Total Stock Market Index Fund and the other 20% into their Total Bond Market Index Fund. Years down the road, as you get closer to retirement, you can gradually shift those percentages, with more going to the bond fund.

There are no absolute guarantees in life, but following this formula will, in my opinion, provide you with a very comfortable retirement.

Plus, you won't have to spend your nights fretting over whether some high priced broker cares more about his retirement than yours.

Disclaimer: I have no connection to Vanguard except as a highly satisfied customer who is thoroughly enjoying his retirement after many years of steady, boring, investments in index funds.

gooner

A RothIRA is a good place to start.

Vanguard is a good company to work with.

If you don't know much about selecting the type funds to be in the ira, I would suggest a target retirement fund. The target funds start out with a higher percentage of stocks and lower with bonds and as you near retirement it automatically adjust to be more conservative.

At your age, I would suggest the Vanguard target Fund 2050.
Here's a good link from Vanguard describing it...
https://flagship.vanguard.com/VGApp/hnw/funds/snapshot?FundId=0699&amp;FundIntExt=INT

Good for you to be thinking about this at your age!

save123

Buying individual stocks can be risky. Unless you have the time and knowledge to research the stocks and then follow their earnings reports, press releases, etc., I would not advise buying individual stocks.

Buying mutual funds offer a way that you can diversify over a group of stocks. A broadly diversified stock fund such as Vanguard Total Stock Market Index is a good core holding for domestic stocks. Adding in an International Index fund gives you exposure to the world outside of the USA. Further adding a short term bond fund gives reduced volatility to your investments without sacrificing too much return.

At 18 yrs old I would suggest starting with a fund company that sells no-load funds (Fidelity, T Rowe Price, Vanguard, and others). Decide what allocation you want: for example 68% domestic stock fund(s), 17% international stock fund(s), and 15% short term bond funds or money market funds. Check you allocation percentages at the end of each year and see if yiy are where you want to be.

Don't be frightened by the daily , weekly or monthly ups and downs of the market. Remember that you are shooting for a retirement about 49 years from now. As you get closer to retirement, you will want to reduce your exposure to equities to reduce the volatility of your investment funds.