IRAs

[TarpleyG]

I have a traditional IRA now with B of A.  I want to move it over to a brokerage Roth IRA at HSBC bank.  How safe are these brokerage type accounts?  I realize they are not insured and that they may indeed lose value but how big an issue is that really?  Any other tips/hints on IRAs in general?

Greg

[Paddy]

I think it depends on the underlying investment.  If it's t-bills, for example, that's as good as FDIC insurance, but it won't yield much.  If it's some mutual fund it could earn a good deal more but with risks.

[TarpleyG]

I am pretty sure it's mutual funds...

[Paddy]

Nothing wrong with a good mutual fund.  Check it out on http://www.morningstar.com/ and see how it's rated.  Should have at least four stars.  If you decide to go for it, fund it monthly in smaller amounts up to your annual IRA limit.

[mormonsniper]

Roths are ok, if your income is high enough that a traditional won't do you much good as far as a tax deduction is concerned (especially if you have a 401K with an employer). A self directed Roth IRA is more work but YOU control what is in it. This means you have to do your due diligence on investing. Remember, all dividends are tax free in a Roth so high yielding stocks make for a good investment. They are normally high risk as well. Younger folks might be able to absorbe a bit of risk where older folks who are getting closer to retirement need to keep what they have as the saying goes. If you are younger and start a Roth, any dividends are tax free so a long term Roth could yield very satisfactory results, as long as you can handle a little risk. The dividends for cash are also higher than your average savings account since the money will remain in the account until you draw it out at retirement. Remember also that the IRS looks at multiple IRA accouts as one big one.

Hope this helps.  A financial advisor (certified) can answer any additional questions you might have.


Mutual funds are ok, especially if you do not want to mess with learning to invest your money. Remember though that in a mutual fund, you get good stocks and some that aren't so good. Less risk... sometimes.

Blessings to all,
ms

[The Rabbi]

Active mutual funds stink, as I have posted before.  The biggest thing you can do to help yourself is look at the fees charged.  Most people dont.
Investing is hard enough but adding bogus and excessive fees only puts you that much further behind the 8 ball.  And it is something you can control, unlike investment returns.
Why would you want to convert to a Roth IRA?

[mormonsniper]

I will agree with the Rabbi. You could leave your traditional IRA right where it is and start a Roth independently.
Moving the traditional to a Roth will cost you money (taxes basically) since these are deferred funds. If the traditional no longer gives you the tax break you are looking for then you could simply start a Roth and leave the traditional one alone, other than continuing to "manage" it. I personally have canceled all mutual funds in my brokerage account. The only mutual funds I have are in the 401K at work. My employer matches 4% so that is not bad with 1% automatic. I have one stock in my Roth right now. As soon as I find some more "good" ones, I'll buy them (a little at a time, on the dips) to increase my IRA's value, NOT to diversify. The risk is always there. Do the work. Ask questions. DO NOT invest in a stock based on a message board. Read them certainly. One good one site is valueforum.com. Nice folks.

good luck

ms

[brimic]

I follow Rabbi's sentiments as well. If you want to put money in a diverse fund, go the ETF (exchange traded fund) route which are index funds that function as a mutual fund but have extremely low fees. A typical mutual fund will cost you around 1% on up for maintenance fees (advertising fees fro mutual fund companies) and more often than not load expenses (front load or back end load fees for buying and selling the mutaul fund) while ETFs typically cost around 0.1-0.2% in maintenance fees with no loads.

On Roths- It probably doesn't make much sense to convert a trad IRA to a Roth- you'll pay a pretty steep tax burden on it Roths do make sense if you have a company 401K that doesn't offer a company match. my wife and I typically max out our Roth contributions every year and put 10-15% into 401Ks.

Investment strategy- the Dogs of the Dow strategy is a very easy and fairly well documented strategy. The real magic of it is that you buy and sell on a set timeline, which keeps you disciplined and helps you avoid the temptaion of buying and selling stocks on a whim which is sure to lose you money. The downside and risk is that you are buying Blue chip stocks that have been beaten down pretty hard over the previous year and there's no guarantee that a bad big company won't turn into a big worse company. If you have fairly small amounts of money to work with <$10,000 its probably better to put it in an index to avoid trading fees cutting into your gains.
http://dogsofthedow.com/

[mormonsniper]

You should also be aware that you can purchase stock directly from a company, if they allow it through a direct stock purchase plan. There are no brokerage fees. You pay your money into an account at the transfer agent and they in turn purchase the stock and hold it for you, sometimes at a slight discount... say 1 or 2%.

You can also reinvest in a stock automatically through a dividend reinvestment program. No fees there either as far as I know. Not necessarily a good thing on a stock that has it's ups and downs.  Many times folks take the cash and then purchase the stock when it's price dips.

I do both of these on "my" stock of choice. I have it in a non brokerage account, my Roth IRA and I can and have purchased it directly, when I have a little extra cash on hand each month.

Hope this helps,

ms