Roth Fund Diversification

[dave1231959]

Hi All,
I'm getting ready to begin investing in a Roth. Do folks normally invest in more than one mutual fund for their Roth account?
thanks
Dave

 

[bkrownd]

It all depends on what's available to you, and how it fits in with your overall diversification. I use my Roth to take advantage of TIAA Real Estate.

 

[TiCKed]

As with all investing....it depends.

But when you start out, you'll probably have a pretty small balance, so one fund is probably the most you can do due to minimum investment rules. Depending on your overall asset allocation, it could be all stocks, all bonds, all highly speculative, all safe and secure. Depends.

But you can diversify with a fund that holds both stocks and bonds if you want. I use Vanguard's Wellington: 65% stock, 35% bonds. Another year or so, and I'll probably have enough to start having some "fun" with it, and maybe go more agressive.

 

[Birchtree]

think quarterly dividends

Dave,

By all mean please consider individual stocks that pay a good dividend yield - they will dividend reinvest in most programs for free. Once you have established an account you will have so much more flexibility when you might need a few dollars. And if you decide to trade there is no paper work. The only real limitation is the cap - but over several years it adds up and the benefit of quarterly dividends allows even more purchases. That's more money available 4 times a year compared to mutuals yearly payout and capital gain reinvesting. Let your wife pick out the stocks. Take care

Dennis - permabull #2

 

[Mike]

If diversification is your goal, focus on things you cannot do with your TSP money: bear market funds, precious metals/commodities, emerging markets, and REIT's.

Funds like to have minimum investment rules, though - so many of them won't be accessible to you via the Roth, at least in the early going.

 

[dave1231959]

I guess its really kind of a basic question but I'm only limited by the annual amount? I can have, for example, 1/2 of the annual limit in two funds, etc? I don't have to just pick one avenue and put the whole annual amount in that one? I realize that its counterproductive to spread it too much, at least with the amount that will be available for the first few years.
Thanks for the advice, this will be my first foray outside of the TSP and I don't want to step on it.

 

[mlk_man]

You can invest in as many funds as you want Dave, as long as you meet the minimum requirements of the particular fund. If you don't meet the requirements but still want to invest in a certain sector of the market, ie reits, energy, or whatever, you might consider ETF's.

This might help you out:

http://quotes.nasdaq.com/asp/ETFsscreen.asp

 

[Rod]

Late reply... BUT...

I guess its really kind of a basic question but I'm only limited by the annual amount?

Yes, Dave. You are limited by the annual amount of the IRA.

If your limit is $4,000 and let's say you find 4,000 mutual funds with minimum contributions of a buck, then you can have 4,000 mutual fund accounts.

Of course, this is extreme. But I'm sure you get the picture.

God Bless

 

[Rod]

BTW, I have been tracking both T. Rowe and Vanguard Lifecycle funds.

I am leaning toward opening the T. Rowe 2040. More of an expense ratio, but they are more aggressive toward stocks than Vanguard.