Bigger and better selection of mutual funds
Most company 401(k) plans offer a limited number of investment choices. The average 401(k) plan offers participants a selection of just 19 funds, according to a recent study by the Plan Sponsor Council of America.
Those constraints disappear when you open an IRA with one of the nation's leading mutual fund companies. For example, T. Rowe Price sells more than 100 of its own mutual funds, Vanguard offers more than 150 and Fidelity has nearly 200.
In addition, these custodians allow you to purchase mutual funds from other companies. Fidelity says its customers can select from an array of more than 10,000 funds from hundreds of firms.
Having a wide variety of investment options can protect you from the mistake of putting too much of your nest egg into a single mutual fund, says Nathan Kubik, a Certified Investment Management Analyst at Carnick & Kubik, which has offices in Denver and Colorado Springs, Colo.
"There is no way to guarantee a (single) fund will perform well," he says.
Investing with a firm that offers a greater selection of funds allows an investor to build a diversified portfolio that matches his or her level of risk tolerance, Kubik says.