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retirement

How to invest in a Roth IRA

 

 

Investing can be intimidating, but getting started with a Roth IRA shouldn’t be. First, you have to decide how you want to invest.  Now there are three basic options when it comes to opening a Roth IRA. You’ve got a bank, a mutual fund company, or a brokerage firm.

Now at a bank, the fees may be low but the investment options may be limited to, well, CDs and money market accounts. Buying a no load mutual fund directly from a mutual fund company, well it can be efficient but that’s only if you’re interested owning a few funds.  A brokerage account, well they’re going to let you access any type of investment from one account, but there may be annual fees and transaction costs that you’ve got to content with.

No load index funds with low fees can be a great foundation for your portfolio. Now, while most index funds are extremely low cost, not all are. Be sure to compare expense ratios when evaluating the funds.

Fees; they can kill your returns, especially when you’re just getting started. Annual fees; you’ve got transaction costs and other sundry methods for picking your pocket. Well they add up fast. Depending on the company, there may be a minimum required to open the account or they may allow free electronic fund transfers to help build up the account. Every provider is different, so you want to make sure that you shop around for the best deal you can get for you.

Then all you’ve got to do is open the account. And most Roth IRA accounts can be opened online, through the mail, or in person. For speed and convenience, going online cannot be beat. Often you’re going to have the option of setting up an electronic fund transfer. That’s going to be between the new account and your bank account, so funding it is going to be as easy as opening it online. Keep in mind that the maximum contribution to your Roth IRA can change, and that depends on the current tax laws and your age. For more information on Roth IRAs visit Bankrate.com.

 

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