Should I invest in Mutual funds or Stocks in a Roth IRA ?

**Broken Arrow** · 09-11-2009, 08:05 AM

Hi, welcome to the forums.

So, what is your investment style again? Are you strictly a passive investor, or are you an active trader and plan on continuing to be one?

I think the investment style will dictate your investment selection more than the type of retirement accounts you use.... Mutual funds for passive investing, individual stocks and ETFs for trading.

Finally, you don't really need a financial adviser if you don't want to....

**aim-high** · 09-11-2009, 08:10 AM

Hi,

I am a passive investor. As far as investing is concerned, I am not an expert in choosing mutual funds and I do have some experience in picking stocks. I am thinking to myself why not use a financial advisor's expertise in choosing mutual funds and invest the money in it rather than using my expertise in picking stocks.

**disneysteve** · 09-11-2009, 08:18 AM

Originally posted by aim-high View Post

I am thinking to myself why not use a financial advisor's expertise in choosing mutual funds and invest the money in it rather than using my expertise in picking stocks.

Why not? Because that financial advisor is going to charge you a fortune to do something that you can do just as well on your own. Plus, chances are that he will sell you funds that have a sales load and high expenses. Forget the advisor. Open an account with a low-fee, no-load mutual fund company like Vanguard, Fidelity or T. Rowe Price and do it yourself. If you have questions, come here. We'll answer them for free.

**Broken Arrow** · 09-11-2009, 09:08 AM

Originally posted by disneysteve View Post

If you have questions, come here. We'll answer them for free.

SHHHHH sshhh!

Ahem, what he means is that um, we'll be more than happy to answer them for LESS than what your advisor will ever charge you. We even accept easy installment plans on all major credit cards, cash, check, and on occasions, even cupcakes....

What?

Oh alright. Or we can do it for free.

**creditcardfree** · 09-11-2009, 09:14 AM

I agree...invest in no load mutual funds and get some ideas here to help you narrow down the numerous choices.

**Ima saver** · 09-11-2009, 11:36 AM

I agree. I have never paid a load on any mutual fund. I like Vanguard's mutual funds because they have such low expenses.

**aim-high** · 09-11-2009, 11:50 AM

What about American Funds ? That was something my financial advisor was saying he would pick from.

**disneysteve** · 09-11-2009, 11:57 AM

Originally posted by aim-high View Post

What about American Funds ? That was something my financial advisor was saying he would pick from.

Run away as fast as you can. He is not an advisor. He is a SALESMAN and nothing else. American Funds are LOAD funds. That means you pay a steep fee every time you buy shares. For an investment of less than $25,000, you pay 5.75% commission. So if you invest $1,000, that means $57.50 goes to them and your actual investment is only $942.50. STAY AWAY!

**aim-high** · 09-11-2009, 12:01 PM

Steve,

Ok.. I was aware of that fee of 5.75%. The advisor mentioned about it. I would think apart from that 5.75% , I would also be charged for actually buying the mutual fund (i mean the transaction fee or trading fee just like the stocks). Let me take all of your advise and start checking out the low load fee funds or no load fee mutual funds.

**Broken Arrow** · 09-11-2009, 12:14 PM

Surprisingly, I think their fees have gone down! According to this, A class charges are now down to 3.75% for $100k or less.

Expense ratios are.... say, around 0.7% to 1.5%, depending on the fund?

But yeah, I'd still run, not walk away from American Funds.

edit: By the way, that reduced 3.75% (front load) is what they charge you for buying the funds. After that, they will charge the expense ratio to maintain the fund for you.

That is, unless you qualify for their C class funds, in which case, your sales charge (back load in this case) is a nominal 1% if you want to sell within 1 year, or 0% if it's 2 or more years. The catch is that I think you have to maintain around $850k with them to qualify for the C class.

**disneysteve** · 09-11-2009, 12:36 PM

Originally posted by Broken Arrow View Post

Surprisingly, I think their fees have gone down! According to this, A class charges are now down to 3.75% for $100k or less.

The 3.75% load is for bond funds. Stock funds are still 5.75% under 25K, 5% for 25-50K, 4.5% for 50-100K.

**aim-high** · 09-11-2009, 12:38 PM

Hi,

I know when buying a stock, I pay a commission fees while buying and while selling I pay the same amount. But for mutual funds, I see there is a setup fee, load fee, expense ratio and all that.

To keep it simple, lets say I put $1000 in my Roth IRA and I want to invest all the amount in Mutual funds. lets also say I pick one of the cheapest vanguard fund. If I use all the $1000 to buy few shares of this vanguard fund, what are the fees that I can expect ? If anyone can give me an example, that would be great to understand.

**Broken Arrow** · 09-11-2009, 12:39 PM

The 3.75% load is for bond funds. Stock funds are still 5.75% under 25K, 5% for 25-50K, 4.5% for 50-100K.

Ooops! Silly me for looking at the wrong column.

**Broken Arrow** · 09-11-2009, 12:43 PM

Originally posted by aim-high View Post

To keep it simple, lets say I put $1000 in my Roth IRA and I want to invest all the amount in Mutual funds. lets also say I pick one of the cheapest vanguard fund. If I use all the $1000 to buy few shares of this vanguard fund, what are the fees that I can expect ? If anyone can give me an example, that would be great to understand.

That's the beautiful part about Vanguard's index funds. There are no front or back loads. Just a straight expense ratio that's anywhere from 0.2% to 0.4%.

By the way, most Vanguard funds will require $3k to start. The STAR is a notable exception, and the expense ratio on that one is 0.32%.

Should I invest in Mutual funds or Stocks in a Roth IRA ?