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What a fun topic, huh! I just spent the better part of an entire day researching all of the available options for my money.  I must confess, that I know absolutely NOTHING about investing money. ZERO, ZIP, NADA, ZILCH.  With all of the low-risk options (online savings, MMA, CD’s) paying a minimum of 5% APY (as opposed to the measly 1.75% of my savings account) I finally decided I needed to become an informed investor. And boy, do I still have a lot to learn!

First and foremost, I have figured out that I must open a Roth IRA as soon as possible. Actually making that decision was not difficult — I need to start saving for retirement, and since I don’t have any employer plans(e.g. 401K, SERP), I need to at least start saving on my own. And choosing between a regular IRA and a Roth was easy.  With my measly graduate student salary, it is very very very (okay, 100% chance) likely that I will be in a higher tax bracket when I retire, so I will be saving money if I pay taxes now rather than when I take the money out at 59 1/2. Now here comes the hard part. What IRA provider do I go with? Banks, mutual fund companies, or brokerage firms? Where to invest my Roth? There are so many options! I can choose from stock, mutual funds, money market accounts, CD’s. Since I want to plunk my money down somewhere and not have to hassle with it, but still make a decent yield over time, I’m pretty sure I would like to allot my entire IRA towards the S&P 500 Index Fund. From what I’ve read, the S&P 500 Index Fund manages to beat 80% of actively managed mutual funds. I can live with that. And as far as IRA providers go, I want one with minimal fees (no maintenance fees, no minimum monthly deposit, minimal commission). I’m still researching on this one. There has been a lot of positive feedback about Vanguard Roth IRAs. Fidelity as well, although Fidelity seems to have steep fees.  Let me know any opinions or suggestions on the Roth IRA. Keep in mind, this is a maximum of $4000 per year.

Now for the rest of my money, I have similar options. I can just stow savings away in my credit union. 1.75% = not good. There are several online savings and checking accounts that are paying high yields at the moment. Emigrant Direct is giving 5.15% for their American Dreams Savings Account. Not a bad yield for liquid cash.

I can put it into CD’s. This is better, as the yield is higher, but it locks my money up for years at a time. So, if I need it for, say, a house down-payment, then I will not be able to access it (or pay a humongous fee to unlock it).  I have found two local credit unions giving 6% APY on 10-mo and 12-mo CD’s (Desert Schools FCU and Arizona Central CU). And then there are mutual funds, which I know absolutely nothing about. I don’t know which are good for short-term vs. long-term investments. I have no clue how to evaluate a fund to determine whether it will be a wise investment. And of course there are stocks, which I have no desire to invest in at the moment. A bit aggressive for me. I have too little money to lose all at once :P :P

For the time being, I have chosen to open an account with TD Ameritrade and take advantage of the free 2gb Ipod Nano bonus. If all goes well, I will have a new Ipod within 8 weeks :)

5 Responses to “Mutual Funds, CDs, and Roth IRA’s”

  1. kledus says:

    send me the link for the ameritrade promo please.

    and for the Emigrant Direct thing too :)

  2. admin says:

    Ameritrade Nano promo:

    I also sent you a referral…so if you do end up signing up, use that please ;)

    And here is the link for Emigrant Direct:

    But I found a sweet deal where you can get $10 by signing up through this guy’s link:

  3. iliak1 says:

    Scottrade ?

    Hey Heather,

    I spoke with Zheng about finances since he knows quite a bit about them – he has used Scottrade since he was 18. They’re an online discount investment/brokerage firm, and apparently they’re cheap.

    As for what to invest in, random googling led me to check out the vanguard stuff you mentioned – vti, vo, and vw, in decreasing order.
    Not sure about a good distro though.


  4. admin says:

    Re: Scottrade ?

    Hey Mark, yeah, I don’t know if I made a detailed post, but I did a LOT of research (you should remember, I was a reading fool and you turned your nose up at it :P), and ended up going with Vanguard. At least for my retirement funds. Mostly off the recommendation of Jonathan over at MyMoneyBlog (a lot of his posts were helpful, but this one was probably the most: http://www.mymoneyblog.com/archives/2006/12/specific-mutual-fund-investment-ideas-for-beginners.html)

    I ended up getting the Vanguard Target Retirement 2045 Fund. He has used Scottrade, do a search on his site for his Scottrade posts. As with anything, do your own research and choose what is best for YOUR specific goals. Don’t go solely off the referral of someone else. That is what you did with your first financial guy, if I recall ;)


  5. admin says:

    My personal reasons for going with Vanguard: Vanguard has the lowest expense ratios and no annual maintenance fees. heck out this post for a comparison of the expense ratios: http://www.mymoneyblog.com/archives/2006/12/target-retirement-mutual-funds-t-rowe-price-vs-vanguard.html

    I was also looking for a targeted retirement fund, since I didn’t want to spend a lot of time at the computer monitoring my stock portfolio :P Vanguard’s targeted funds seemed the best to me at the time. They are a VERY highly regarded company, they have been leaders in index funds for a while now, and I thoroughly enjoyed the Boglehead book I read. There is a minimum $3,000 balance but I was starting out with $4,000. And now the annual $10 fee for balances less than $5,000 have been waived when you sign up for e-statements — another bonus for those just starting out.

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