Best Places to Invest for Retirement

Written by Nickel - 4 Comments

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A reader named KC recently wrote in with a question about investing for retirement:

I’m 28 years old with a wife and a six month old baby. We’ve always been money-conscious, but would really like to focus our efforts. We both have Roth IRAs, but are not satisfied with them. They are heavily loaded, and we weren’t that familiar with them when we were advised to set them up. My question is where you would recommend I go for a long-term investing vehicle? I always hear to go with no-load mutual funds but would like your opinion.

This is a great question. I’ve said it before, and I’ll say it again… Friends don’t let friends pay mutual fund sales loads.

My personal preference when it comes to long-term investing centers on low cost, no-load mutual funds. When I say low cost, what I’m really talking about is “passively-managed” index funds that seek to match the market as a whole, or some segment thereof.

As for my favorite places to invest, Vanguard is at the top of my list. We also have some money with Fidelity and have been quite happy with their offerings. A third option would be Schwab, who has a bunch of low cost mutual funds with a low minimum investment of $100.

A slight variation on the above would be to go with index ETFs instead of index mutual funds. The underlying premise is the same, but you get a bit more flexibility when it comes to trading shares. If you do go this route, make sure you select a good discount broker so the trading costs don’t eat you alive.

Of course, there are other options to consider, such as opening a Treasury Direct account so you can buy Treasury securities such as T-Bills, T-Notes, T-Bonds, Series EE Savings Bonds, Series I Savings Bonds, etc. This will allow you to purchase these securities direct from the Federal government with no middleman.

Just keep in mind that the optimal composition of your portfolio depends on many factors, so you really need to give a lot of thought to your time horizon, risk tolerance, etc. before you make any major moves.

Published on March 10th, 2010 - 4 Comments
Filed under: Retirement, Saving & Investing
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About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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4 Responses to “Best Places to Invest for Retirement”

  1. 1
    MITBeta @ Don't Feed the Alligators Says:
    March 10th, 2010 at 2:27 pm

    I’ll second the 1st vote for Vanguard.

    But, T. Rowe Price is also a good management company. I heard that they were founded on the principle of being the low minimum version of Vanguard. You can open an account there with something like $25 as long as you set up an automatic payment plan, versus Vanguard’s $1000, $3000, $10000 minimum structure.

  2. 2
    Paul Williams Says:
    March 10th, 2010 at 4:32 pm

    I’ll second the vote for Vanguard as well.

    I think it’s worth it to save up in something like an ING Direct Orange Savings account until you reach Vanguard’s minimum. You can start out with the Vanguard STAR Fund at $1,000 (not my favorite but it’s the only low minimum option). Once you hit $3,000 you can go to a target retirement date fund. After that, you can start splitting it between other funds for better diversification. I created a calculator to help specifically with that:

    http://www.providentplan.com/5.....portfolio/

    Hope it’s OK to share that link, but I think it’s a useful tool for anyone who wants to invest in a diversified portfolio at Vanguard.

  3. 3
    Dean Says:
    March 10th, 2010 at 4:43 pm

    Having dealt with both Vanguard and Fidelity (not any longer) I can highly recommend Vanguard. While initially impressed with Fidelity’s offerings and rates I was more than upset with them when it took an inordinate amount of time to both “move” and withdraw funds. Fidelity’s very slow (and seemingly intentional) slow-rolling cost me several thousands of dollars in just a few days. I will never do business with Fidelity again.

  4. 4
    Ted Says:
    March 12th, 2010 at 6:26 pm

    I use Fidelity and have been pleased with them. I also have ING savings, and for a couple years had some mutual funds through ING as well. Ultimately I did not like ING for mutual funds, though, as they were not as transparent as Fidelity with regard to performance and fees of their funds.

    Above, Dean says Fidelity was slower with moves and withdrawal than Vanguard. Are there any other reasons people find Vanguard to be better than Fidelity?

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