I haven't started an IRA yet. Roth IRA?

Okay, so this is what I understand so far. An IRA is like a shoebox and my investments are the shoes. And the shoebox is what shelters me from the taxes. And there are penalties if I were to withdraw early before I retire. So this would mean it would be a long term investment, right?





If so.. can someone recommend a mutual fund or stock I can put my money into as a long term investment? Or should I just go with a money market savings? Any other suggestion inputs welcome.

I haven't started an IRA yet. Roth IRA?
Q: So this would mean it would be a long term investment, right?


A: Yes, an IRA should be considered a long term investment.





Q:If so.. can someone recommend a mutual fund or stock I can put my money into as a long term investment?


A: If you can manage it, try to put the maximum in an index mutual fund. Open an account with a money market fund that pays a decent interest rate. That way you can move monies around and leave in the MM while deciding on your next investment.





Q:Or should I just go with a money market savings?


A: I would not recommend leaving it in the MM. With inflation your net gain would be next to nothing. Leave in mutuals and watch them on a monthly basis to ensure they are still performing for you.





After you gain experience and begin to understand sector rotation and how money flows in the industry, you might want to investigate Exchange Traded Funds or ETFs.


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Reply:I just want to clarify: while the shoes are in the shoebox, you can change the shoes. So, while it should be a long-term investment, it doesn't have to be. The box can contain different shoes. You can trade as often as you like.





Personally, for a stock, I like Exxon. I understand what they do, and they go up every year and they pay a dividend, and you can open an IRA or ROTH IRA with them (but there's a $45 a year fee) and just keep reinvesting the dividends. A money market savings account won't appreciate and pays little interest. You're better off with dividend paying stocks, which rose 14% last year when the market rose 7%, and they're safer than stocks that don't pay a dividend. As to the Roth IRA vs. IRA debate, go with the Roth. With a regular IRA, the money is tax-deductible going in, with a Roth IRA it's tax deductible coming out. So, you might save on the IRA going in, but you'll have a lot more money when you retire (money grows with time and dividends or interest payments), so it's better not to pay taxes then.
Reply:my experience in IRA is that you can contribute 4000 and this is tax deductible from the top, but when you take it out, it then becomes taxable at that time and you cannot withdraw it until you're 59-1/2. I think since it's a long term and mutual funds are not guaranteed and treasury bonds are, so to speak, then treasuries is the good for this.


Roth IRA - you cannot have both as I understand it. You may contribute up to 15,000 and the earnings are not taxable and you can withdraw I think, just like a bank account. I have often wondered why that is, but I use the broker Thinkorswim.com and have found them to be quite helpful, honest and dependable and do your trades while you're on line. Give them a call about your question and see what they say. Again, I think treasuries or public utilities are more guaranteed than mutual funds. What is a percent or two when there is a lot of money involved. I want to sleep at night and can't with mutual funds as some are crooked.
Reply:You have the right idea with the the shoe box metaphore. The idea is to shield the gains and earnings from that money from taxes, so its a long term investment According to your age, put about 30 percent in a short term bond fund and 70 percent in a growth fund. Be careful about rolling over a 401k into an IRA. If you contribute to that IRA you lose the opportunity to roll that money into another company retirement plan. So, you may want to keep it separate. Money markets should only be used for cash that you may need quickly.
Reply:You don't say how old you are but it's almost never too late to start an IRA. Review your funds carefully before selecting them. Decide several things:


1. What degree of risk you are willing to take (some funds invest in very risky ventures!)


2. What kind of fees you are willing to pay


3. The amount of growth you are desiring (goes with risk for the most part; the higher the growth, the higher the risk)


Morningstar has a great fund rater and motley fool also does (amongst many others).


http://www.fool.com/shop/newsletters/11/...


and


http://www.morningstar.com/Cover/Funds.h... are good for starters. I will not suggest any individual funds as this is a highly individual choice based on risk aversion, etc but select a few funds you are interested in and plug them in the ratings site and see how they stack up. Good luck!
Reply:Think about a lifecycle or target date retirement fund. They are mutual funds designed for long term investment for retirement. The mutual fund staff manages your money by putting it into a diversified portfolio. You don't have to do the money management part yourself. See the webpage below for more details.



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