Hello. I am new to investing, in general. I am 22 years old, and want to start a Roth IRA making the max of $2000 a year in contributions. This is about where my knowledge ends. I see people talk about no-load mutual funds, and different places to start an IRA, etc, and quite frankly I am overwhelmed. I was hoping you guys could explain this stuff to me in laymen's terms as it were, perhaps even advise me on a good place to setup the IRA, low fees, good service, etc...

I realize this is a vague request, so let me ask a real question or two

- I see mutual fund places like Janus, etc, seem to make it easy for a person new to IRAs to start one, so perhaps something like this would be for me, but what would I be losing by going this route? I assume for it to be easy it must be dumbed down some, or perhaps higher fees, something... My goal is to find a mutual fund that will manage itself, rather than have me make individual stock picks, if that helps.

- What does it mean when a mutual fund is a no load fund? I get the impression it means that there are no transaction fees, or perhaps annual fees, etc.. If that is the case, it seems to me that everyone would just pick those. Are no load funds rare then? Or is there a reason I would not want to go that route?

- One last thing. Does anyone know a good url that might explain this? I look around, and I can find a great explanation of a roth ira, and I'm solid on what it is and how it works... I can find decent explanations of mutual funds, but they go mainly into details of how to deal with the taxes on these, which the roth negates as I understand it. I'm looking for something for a novice invester, that explains how to do what I want to do hehe, which is setup a roth ira that I just put money into, the mutual fund does all the stock choices, etc, and I don't get eaten alive by small fees because I was too ignorant to realize I setup my roth ira all wrong.

Thanks much for any advice you can provide, feel free to email me, or post here in the message board for everyone's benefit.

Congratulations for thinking about the future at such a young age. Smart.

OK, you got the Roth basics, if you have any further questions try www.rothira.com or this site.

Mutual funds are a very reasonable choice, and you have about 8,000 options. The two major catagories loaded and no-load. Loaded charge a fee (often in the 3-7% range) either up front or upon withdrawal. Loaded funds are often sold by a broker who is supposed to provide advice. However, all mutual funds (loaded or no-load) have a variety of imbedded expenses and a fee structure for IRA accounts. I would recommend staying with no loads since you apparently are willing to do some work to understand your choice.

Who is your custodian? Even going the fund direction, you still have a custodian choice. You can pick one of the mutual fund families (Janus, American Century, Invesco, Vanguard, etc.) or you can choose a brokerage that has connections to mutual funds (Schwab, Etrade, etc.). The MF option is direct, but you will be limited to choices that firm offers. The brokerage option will allow you to pick funds from different companies. This is not a big issue initially since you only have 2K in each of the next couple of years.

How to discover the MF that is right for you? Well there are hundreds that are suitable. Initially I would suggest a broadly based stock fund. You could choose an index fund such as the Vanguard 500 which owns all of the S&P 500 stocks... the main features of index funds are ultra low expenses and diversification. Another choice would be a growth orientated stock fund such as Marsico Focus or Janus Mercury. You need to read the investment objectives of a range of MFs, examine their performance, stock holdings and expenses.

You will find lengthy lists of MFs in the Wall Street Journal. But you may want to look at the more digestable listings in Money, Worth, Kiplinger, or even Consumer Reports (March 99) magazines. At your age, I would highly recommend subscribing to Kiplinger... good coverage for 20 somethings.

Also, major mutual fund families all have web sites. All fund families have 800 numbers. I recommend that you chooose atleast 3 different MF families and call them. Tell them you are just getting started and request their "beginner" package. Most fund families have excellant materials.

Don't worry about the week to week flucuations in your investment. You are starting a multiple decade effort. You are on the first inch of you learning curve. It may take about 5 years before you master some of the basics.

Do you need multiple mutual funds? Not if you choose a broad based stock fund. You can keep plugging in 2K each year for the next decade. But you may want to eventually own a few different funds: US blue chip, growth, international, technology, etc. Your choice. Just don't over do it and end up with excessive statements and fees.

Likely results: if you get a 10% annual return, your assets will double every 7 years. For example, 2K growing at 10% to about $128,000 when you are age 64. Plug in 2K each year, and you are on the way to being a millionaire. Nice goal. Good luck.

M. mandoris

I can't answer your questions, but I have two to ask you.

1. Did you opt for a Roth because you just wanted one or read something that made you hope it would be advantageous, or did you actually get some numbers to see if a Roth may be good for you?

2. More important, how do you get those little yellow faces in your post?

Art

Well, thanks John G for all the advice, first of all.

Second, to answer Art's two questions...

1. I've heard many good things about a Roth IRA, and have done some research online about them...

2. The webboard software seems to substitute smiley faces with graphics... Those are just a : ) without the space in the middle, or a : ( for that matter... hehe

Thank you.

[This message has been edited by Art E (edited 01-05-2000).]