Roth IRA fund options

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Roth IRA fund options

Postby primus » Thu May 09, 2013 12:20 am

Hey Guys

Looking for some tips in picking Roth IRA funds.
I opened 2 accounts, for my wife and I with $10,500 each @ Vanguard

Unless there are some other compelling options, I'd probably maintain it with Vanguard
That said, I don't know which funds to pick -

Here are some options I explored (prefer aggressive growth):

Option 1: Vanguard Target Retirement 2040 Fund (VFORX)
Expense: 0.18%
Holdings:
1 Vanguard Total Stock Market Index Fund Investor Shares 63.5%
2 Vanguard Total International Stock Index Fund Investor Shares 26.6%
3 Vanguard Total Bond Market II Index Fund Investor Shares* 9.9%

1) Are target retirement funds good for Roths or 401(k). My wife has a 2045 Vanguard fund in her 401(k)
2) Is it smart to choose the same/similar fund for both since we'll retire around the same time (25 odd years of service before we retire)

Option 2:
Select top yields (& low expense ratio) from here - https://personal.vanguard.com/us/funds/ ... =avgAnnTBI

In terms of skills, I am a beginner to average level when it comes to picking funds. However, I am usually busy with work/travel etc
So, what would you suggest based on the above.
I'd truly appreciate pointers to good funds so that I can try 'em for a year or so before I re-visit.

Thanks!!
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Re: Roth IRA fund options

Postby sashwin » Thu May 09, 2013 1:44 am

The Target Retirement fund you quote is fine for a Roth IRA account. The tax inefficiency does not matter in Roth IRA, plus you can always change your allocation in a few years if/when you feel the need, without worrying about any taxes on the sale. For details, see these links in the Wiki:

http://www.bogleheads.org/wiki/Vanguard_Target_Retirement_Funds
http://www.bogleheads.org/wiki/LifeStrategy_Funds_vs_Target_Retirement_Funds

-- Ashwin
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Re: Roth IRA fund options

Postby damjam » Thu May 09, 2013 11:53 pm

Is this a mistype?
primus wrote:I opened 2 accounts, for my wife and I with $10,500 each @ Vanguard

The ROTH IRA limit for 2013 is $5,500, so for the two of you it would be $11,000. Or maybe you contributed for 2013 & 2012?

Target Retirement funds are perfect for ROTHs and 401ks. In the future, once you have enough for the minimum investment, you may want to invest in the 3 underlying index funds directly. That would save you a little bit in the expense ratio. However it is perfectly fine to leave your investments in Target Retirement for the long haul.

You might want to read the WIKI page on the Three-fund portfolio. Target Retirement 2040 is just a Three fund portfolio prebuilt for you.

primus wrote:In terms of skills, I am a beginner to average level when it comes to picking funds. However, I am usually busy with work/travel etc
So, what would you suggest based on the above.
I'd truly appreciate pointers to good funds so that I can try 'em for a year or so before I re-visit.

Bogleheads don't generally get into the fund picking business, as you seem to be describing it. Most of us set up a portfolio of low cost index funds that we don't change from year to year (except to rebalance). You might want to read a bit more about the Boglehead Philosopy here: Getting Started. The general idea is to choose a plan of attack and then stick with it for the long haul.
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Re: Roth IRA fund options

Postby primus » Mon May 13, 2013 1:00 am

Thx guys. Thanks for your response.

Yes, I contributed for both 2012 & 2013 for each of us. So, $10,500 each

The blogs are definitely helpful. I started reading how pick funds by risk vs. date.
On your comment of investing in the underlying funds (3 fund investment)
What's the different between VTSMX & VTI? I understand the expense ratio is better for the latter and its an ETF vs. index fund <I think>, but both seem to have the same investments :confused

Thx for reviewing.
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Re: Roth IRA fund options

Postby Default User BR » Mon May 13, 2013 12:49 pm

primus wrote:What's the different between VTSMX & VTI? I understand the expense ratio is better for the latter and its an ETF vs. index fund <I think>, but both seem to have the same investments?

They are share classes of the same fund, so little difference besides what you mention.


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