Now as you know, I’ve begun investing my Roth IRA money. I bought my first set of stocks and would like to have the bulk of my portfolio in nice, save and secure mutual funds. My goal is to achieve a well diversified portfolio.
I’m looking to invest my portfolio like this:
80% Mutual Funds
5% Individual Stocks
As I’m planning to invest a huge chunk into mutual funds for the long run, I want to make sure to be very selective. But quite honestly, there’s hundreds of funds out there and I don’t know where to start. I’m not looking for someone to just point one out and buy it blindly; but I would like to get a little head start. I’ve been comparing a few resources Money magazine, Smart Money magazine and Suze Orman’s book for the YB&F.
I’m not particularly interested in buying an actively managed mutual fund at this point. I’m a little intimidated by the research involved and my strength in sizing up the fund manager and deciphering their fees. So for now, I’m sticking to index funds and exchange traded funds (ETF’s), after all they tend to be less risky and offer competitive long range returns.
However, if you’re interested in actively managed funds here is the list compiled by Money Magazine, along with their picks for Index Funds and ETF’s. For SmartMoney‘s picks check out their list here.
When choosing an actively managed fund, be sure to research the fund manager, how long has he been managing, what’s the fund’s track record, is he about to the leave fund, how does the fund compare to the fund category…
Here is a list of recommended index funds by Suze Orman:
Vanguard Total Stock Market Index contains large, mid and small-caps. Minimum investment $3,000.
Vanguard 500 Stock Index contains large-caps. Minimum investment $1,000.
T.Rowe Price Equity Index 500 contains large-caps. Minimum investment $1,000.
Vangaurd Total International Stock Index comprised of 30 countries. Minimum investment $1,000.
Here is a list of recommended ETF’s by Suze Orman:
VIPERS Vanguard VTI contains large, mid, and small-cap’s.
SPDR Trust SPY contains large-caps.
NASDAQ-100 Trust contains tech companies.
iShares MSCI-EAFE EFA contains international companies.
Recommended ETF by another one my mentors, my father:
SPY Top 500 S&P’s, a dividend earning fund
More on ETF’s:
Exchange trade funds are essentially stocks. It is a fund comprised of stocks that you purchase at a fluctuating market price. With mutual funds, they are typically purchased through the fund company’s website. i.e. vanguard.com, troweprice.com. These are bought for a set price determined at the close of the market each day. ETF’s, however, can be bought throughout the day at the current market price. You will also need a discount broker, such as Scottrade, to purchase these and will be charged a small brokerage fee. Scottrade charges $7.
Disclaimer: Some fault Suze Orman for being too conservative in her approach. However, the recommendations listed here are for those not interested in actively trading their portfolios. These selections are specifically for long term investments (30+ years) using your retirement fund, either a 401k or Roth IRA. If you’re interested in investing outside your retirement account, a more aggressive approach might be better suited.