ROTH investment choices

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audramill

miss akay
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This spring I deposited into both ROTH and traditional accounts. I need to select funds to invest in and I'm unclear about what to choose.

Occasionally, I read Morningstar and have learned a few details, such as keeping expense ratios low and the importance of holding rather than selling. This week, I read about tax benefit of ROTHs for earning dividends. Previously, I experimented with mutual funds (listed below) and now I see that FSRPX wasn't a strategic choice for earning dividends.

Should I buy another fund but hold the FSRPX shares that I own? Or, should I sell the FSRPX shares to buy more of something that pays dividends? Does it really even matter?

Trad IRA:
FCNTX Fidelity Contrafund
ROTH IRA:
FSRPX Fidelity Select Retailing Portfolio
403(b):
FUSVX Fidelity 500 Index Fund
401A:
FXSIX Fidelity 500 Index Fund
FCNKX Fidelity Contrafund K
VMCIX Vanguard Midcap Index
VSCIX Vanguard Smallcap Index

Is it helpful to work with a financial advisor? I'm really interested in learning. Thank you.

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This spring I deposited into both ROTH and traditional accounts. I need to select funds to invest in and I'm unclear about what to choose.

Perhaps you could clarify what you mean by saying you deposited into both Roth and traditional accounts. I hope you aren't referring to a Roth IRA and a Traditional IRA. IRA contribution limits per year apply to all funds in all IRAs, traditional or Roth. For example, if you put $5500 in a Roth IRA last month you can't put anything in a Traditional IRA this year. And while they both have their pros and cons depending on your current and future tax brackets, you should probably figure out which one is most beneficial to you and put it all in that one.

Did you mean a Roth IRA and a taxable account? Or a Roth IRA and a 401K?
 
+1 to above. You have $5500 limit on IRA contributions. It is OK to contribute to both, as long as you don't exceed that limit.

It is not necessary to work with an adviser, as long as you educate yourself. I would read a good book or two on personal finance. Keep things simple and stay disciplined and you will do fine.

In answer to your question, one of the benefits to a ROTH is that you don't have to pay taxes on the dividends you receive. That doesn't mean you should be trying to maximize the amount of dividends you bring in. You need to make a financial plan based on your goals and adjust your asset allocation accordingly. Until you get educated, it wouldn't be the worst thing in the world to put everything into a Target Date fund or something similar. Why did you pick FSRPX?
 
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This spring I deposited into both ROTH and traditional accounts. I need to select funds to invest in and I'm unclear about what to choose.

Occasionally, I read Morningstar and have learned a few details, such as keeping expense ratios low and the importance of holding rather than selling. This week, I read about tax benefit of ROTHs for earning dividends. Previously, I experimented with mutual funds (listed below) and now I see that FSRPX wasn't a strategic choice for earning dividends.

Should I buy another fund but hold the FSRPX shares that I own? Or, should I sell the FSRPX shares to buy more of something that pays dividends? Does it really even matter?

Trad IRA:
FCNTX Fidelity Contrafund
ROTH IRA:
FSRPX Fidelity Select Retailing Portfolio
403(b):
FUSVX Fidelity 500 Index Fund
401A:
FXSIX Fidelity 500 Index Fund
FCNKX Fidelity Contrafund K
VMCIX Vanguard Midcap Index
VSCIX Vanguard Smallcap Index

Is it helpful to work with a financial advisor? I'm really interested in learning. Thank you.

Let's look at expense ratios:

FCNTX 0.68
FSRPX 0.78

FUSVX 0.05

FXSIX 0.04
FCNKX 0.58
VMCIX 0.05
VSCIX 0.05


Both of your IRA funds are pretty bad when it comes to expense ratios. You want something that would be ideally less than 0.10. Why would you be looking at a dividend producing fund for your IRA? I would recommend a mix of 3 funds: Domestic Total Stock Index, International Total Stock Index, and Bond Index. This can be split between all of your accounts. Your IRA can be at any location. If you'd like to keep it at Fidelity, there are some good low cost funds available in their Spartan Fund group.

Check out the WhiteCoatInvestor site for more information and to help get your Asset Allocation determined. Once you have that done, if you still have questions, let us know.
 
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Mathematically one would keep the dividend generating securities like bond funds in a Roth account because those dividends will not be taxed. If bonds were kept in a taxable account then they would be taxed every year, cutting into total return.

In reality I tried doing that for a while but it became a pain in the ass to rebalance everything once a year. Now I keep both my taxable and my non taxable accounts in the same vanguard target retirement fund and they all rebalance for me automatically.
 
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This is confusing. Who is your IRA through? What are the selection of funds that are available to you? Why are you listing 401k funds and 403b funds in that list unless you can invest in those through that IRA account?

You seem like you're trying but are having trouble giving even basic info on your accounts or making clear whether you're contributing to a Roth or Traditional IRA. If you want to go a little more on autopilot, you can set up IRA accounts through Wealthfront or Betterment which might be a decent choice if you're having trouble selecting funds through your current account yourself. Otherwise, you can just invest in a target retirement fund or index fund which is pretty much the simplest (and generally low cost) thing you can do.
 
Let's look at expense ratios:

FCNTX 0.68
FSRPX 0.78


FUSVX 0.05

FXSIX 0.04
FCNKX 0.58
VMCIX 0.05
VSCIX 0.05


Both of your IRA funds are pretty bad when it comes to expense ratios. You want something that would be ideally less than 0.10. Why would you be looking at a dividend producing fund for your IRA? I would recommend a mix of 3 funds: Domestic Total Stock Index, International Total Stock Index, and Bond Index. This can be split between all of your accounts. Your IRA can be at any location. If you'd like to keep it at Fidelity, there are some good low cost funds available in their Spartan Fund group.

Check out the WhiteCoatInvestor site for more information and to help get your Asset Allocation determined. Once you have that done, if you still have questions, let us know.


The expense ratios for the actively managed funds are actually pretty reasonable ... for actively managed funds. Not trying to stir up a debate on active versus passive investing, just pointing out that expense ratios of less than 0.80% for active management is quite reasonable in a world where you can find some actively managed funds with expense ratios of over 2.0%.
 
The expense ratios for the actively managed funds are actually pretty reasonable ... for actively managed funds. Not trying to stir up a debate on active versus passive investing, just pointing out that expense ratios of less than 0.80% for active management is quite reasonable in a world where you can find some actively managed funds with expense ratios of over 2.0%.

Sure, but why pick an actively managed fund versus a passive index fund? Sure, the active managed fund may have years that they beat the index. They'll also have years that they lose. In the end, the index fund will come out ahead.

So as far as choices to invest, I recommend the passive index fund every day and twice on Sunday.
 
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