Starting a Roth IRA?

Question

So, I think I might start investing, and from what I've read, a Roth IRA is the best start. I am a 20 yr old college student who just wants to start to put away some money without having it "rot" is a savings or checking account.

Is now a good time to start? Or should I wait until the economy is looking a little better? I feel that my investment would immediately devalue if I start it now, but I'm not sure.

What should I choose as far as stocks, mutual funds, etc. go? I read that I would get to choose how it was invested, but I'm not sure what would be best. I would lean towards mutual funds, but I too novice to do anything without an experienced opinion.

Thanks for the help.

Answer 1

A Roth IRA makes sense in your situation.

The general rule is that starting today is better than starting tomorrow.

The other general rule is that you invest your savings in risky assets especially at your age.

Having said all that, chances are that the market will be lower in the medium term, but that should not deter you. As long as you keep on a long-term savings plan, i.e. invest the same amount of money in regular intervals, you can use market declines to your advantage by utilizing a technique called "dollar cost averaging". This basically means that with the same dollar amount you buy more shares when prices are low and you buy less shares when prices are high. All you have to do is commit the same amount of money to your investments in regular intervals.

If you were to try to get the timing right, chances are that you will not succeed in the long run. So, the best course of action is to decide on a savings/investing strategy and to stick with it.

As for the funds you want to buy, check out index funds. These funds charge you lower fees than other mutual funds which makes it much more attractive for you to invest in them in the long run.

For additional information please click on the links below.

Answer 2

start with something simple, a 'target date' mutual fund

at 20, you shouldn't be concerned with the value decreasing in the short term. as a matter of fact, if it does - buy more (they are on SALE)

it is true that the market is doing some pretty funky things right now but with a Roth, you're in it for the long haul - so just ride it out