Thread: what is the best IRA fund and/or funds to invest in?

lovegardening wrote:

I have read through so many comments on this TSP board and am TOTALLY confused about what investment funds/IRA funds to invest my money in. I really would like some imput and agreement on some funds that all of you think are the best and would give a good yield. Am new to investing and would like some good imput and help from the people whose comments I have been reading. Sounds like all of you do this for a living. LOL.....

This is a dangerous question to ask. I don't think anyone can tell you that. They might be able to tell you what works best for them, but that is all. I don't think you will be able to get a consensus of what best IRA is best at any given time. Just my .02.

Pyriel

It depends on your situation and your objectives.

If you're young, invest most of your money in equities. Low expense index funds work well for this (such as the vanguard 500 - VFINX). If you're in it for the long term, you'll do well if history holds true to form. The annualized return of the fund I just mentioned is a hair over 10% over the past 10 years... not bad, considering that timeframe includes both a solid bull market and a nasty bear market.

Another option is to go to a life cycle fund - these are the truest autopilot type funds because the fund company automatically adjusts your bond/equity ratio as you get closer to retirement.

There's no sense in getting any more specific than this at this point though, since I know nothing of your situation. When seeking advice on matters such as these, you need to let us know what it is you are looking for - if you want the biggest returns, you will have to take the big risks - which could expose you to heavy losses (even after today's recovery, the S&P is still roughly 60 points off its high for the year).

I was seriously considering moving me and my Wife'sinto a mutual fund in Jan. I'm SURE GLAD I didn't!!!:shock: Orwe would have lost A LOT of $$$.:P

I'm nowlooking out forthe opportune time to do so.

God Bless:^

Rod,

Hindsight's 20/20, and market timing doesn't work.

I saw a study once where they compared someone buying 2K dollars worth of index stock on the worst day of the year (highest price) for 30 years, to someone who did the same thing, except they bought at the best price of the year (lowest price), both in the same fund (mathematical hypothetical scenario). Their end balance after 30 years wasnt that much different at all..... maybe 10-15% difference in the end amount.

So.... who among us can pick the absolute best day of the year, and who picks the worst? What matters is time, consistent investments, and correct asset allocation; not market timing.

azanon wrote:

maybe 10-15% difference in the end amount.

Hey... that's gas $$$ for my bass boat when I'm old-n-retired!:^

I agree, there is no one answer to your question. Here is what I have done.

My IRA was all I had until I joined the Federal service and got into the TSP, in 1986. At that point I lost the deduction for contributions to the IRA (which seems totally unfair). So I put the IRA on auto-pilot and bought a T-bill which matures in 2010. This acts sort of like the G-fund in our TSP, a guaranteed return. The rest of the IRA (~50%) is in three different mutual funds which vary at times but always includes about 1/3 Templeton Foreign Fund. This is nice because it kicks out a dividend every so often which is reinvested and also creates some cash with which to pay the annual management fee. If everything behaves, in 2010 the NAV should be about 40% bond, 60% stocks. Right now stocks have taken a hit and it is the reverse, 60% bond, 40% stocks so I need a rally sometime on the next 5 years to make my goal.

What you want to do is diversify, always. Also, try to find a brokerage house that has some expertise in handling Federal retirees and knows what to do with the TSP and how to invest in such a way as to complement what you are doing over here. I happen to use Dain-Rauscher in St Paul, and I have had the same broker there since like 1985! We get along well and he has been very helpful to me down the years.

Dave

Thanks for your words of wisdom......I plan to retire in 10-13 years from civil service...I do have TSP right now but I would like to have a IRA started. I thought about the vanguard lifecycle funds where they do the work for you... I have checked into several IRA's like Hussman funds, Dodge and Cox, Buffalo.....I would like an account that gives me current income and future income. Also wanted to open up an account for my daughter since the only way she will save any money for the future is to have me put money into an account....any advice?

Guess what? I love gardening too! What you want is for your garden to GROW. You plan to harvest in 10-13 years so why would you want income now, at this early stage? Income from an IRA is useless until you can make withdrawls. My point is that you should be aiming at growth at this stage; start thinking income when within sight of retiring.

(My plan is to roll the TSP into my (traditonal)IRA when I retire from Federal service, and at that point I will break it up into two components -- one to generate income for distributionand the other to provide some growth as inflation-protection.)

To achieve growth you want your share-count continually to increase. This is done by reinvestingdividends throughslow-but-steady purchase of shares which also providesdollar-cost-averaging.

About every three years Dain and I look at how we're doing and decide if we want to get out of any non-performers we have and into something more attractive. There is no churning of the account by frequent buying and selling of individual stocks (and which would also generate fat sales commissions); we avoidrisky new-issues and IPO's; we don't blow with the wind on commodities, futures, hedges, etc. Just nice, well-balanced mutual funds with that one off-shore component, the Templeton Foreign Fund -- the equivalent of the I-fund in TSP.

Since we lose the tax deduction for contributions to an IRA thanks to the TSP, I'd say you want to set up a Roth for your daughter. That way you can both put money in without penalty and achieve tax-free growth. You need professional advice. What I have said here in this thread ispertinent only to my personal situation. Decide on an appropriate goal and then take measures -- small measures at first, baby steps -- that will get you moving in the right direction. Good luck!

Dave

Good question. My method of madness is to compare the track record of mutual funds, ETFs and CEFs (and the TSP funds). I decided to buy CGMFX for my old poorly funded IRA in 2001, and switched to the I Fund several years ago (100%). Despite the fact that the I Fund has been one of the best TSP selections, CGMFX beat it handily even after factoring in their management fee.

What to do?

Compare, compare, compare.

Right now I am seriously considering getting out of the TSP and transfering "the big bucks" to these in roughly equal portions:

ILF iShares S&P Latin America 40
EWZ iShares MSCI Brazil
XLE SPDR Energy
IXC iShares S&P Global Energy
EEM iShares MSCI Emerging Markets
EWW iShares MSCI Mexico
EWY iShares MSCI South Korea
IGE iShares GS Natural Resources
EWC iShares MSCI Canada
EWO iShares MSCI Austria
FSICX Fidelity Strategic Income

Then again, I may put the whole shooting match into CGMFX which currently sports a 5-star Morningstar rating. Or.....