Investment strategy changes...

I’m not thrilled with my mutual funds

Back when I opened my Roth IRA in 2007 all I knew was I needed to save… mutual funds took the individual guessing out of stocks… and I choose “moderate” because I didn’t want to be aggressive or conservative. It was the only Roth account I could find that didn’t charge me an annual fee that would eat up my meager savings… and since it let me start with $250.00 and allowed small $100 monthly contributions I was sold since I didn’t have the $2500-$3000 to open one at the “Big” branches… and their fees scared my little balances…

Now fast forward three years later… What really is moderate? I looked at the individual holdings for that fund versus the other three I originally considered and they are all very similar… what I really wish I could do was a Target Date Roth IRA… I like my little 401-a target date account at work... It seems simple enough and I wouldn’t have to worry about changing my allocation as I age. It’s automatic. Set it, drop money into it regularly and forget it.

Luckily I have more mutual funds available to choose from now then when I first opened the account (including new fund families --meaning no fees buy!). I can also participate with what I call the big guns like “Vanguard” and “Fidelity…” but those guys come at a cost, ($20 a transaction or $4.00 for each automatic one… ) And my small balances don’t want to rock those fees… But I want to experiment with a Target Date Roth IRA….

I considered opening one directly at Vanguard because I’d avoid the Sharebuilder buying fees… and I think I could just take my existing Roth and Deposit it into the new one to get that “initial $3000” thing covered… but I’d like to test the water before I cash out the whole fund and dump it into an investment I’m not sure I’d be comfortable with. But if I didn’t transfer the whole Roth over at once I wouldn’t be able to really test the water the way I wanted to… because of the $3,000 initial investment… since I split my $5,000 between two Roths now ($2,000 to CD’s in a totally free Roth IRA; and $3,000 to mutual funds), I wouldn’t have any money left so 2010 would be a lump sum one time contribution... kind of like cashing out my existing portfolio... which I don’t want to do

So I started looking and I think I found my compromise:

ARDVX

It’s a Target Date 2040 fund in a fund family at Sharebuilder so there are no buying fees. Expense ratio is higher than Vanguard, but lower then my current mutual fund. The Dividends are lower than my current mutual funds too…

But I think I want to try it out and take it for a test drive in 2010. I know Target Date will be heavily in stocks but I think it’s time I take my retirement bull by his horns…. Plus I do have my $2,000 in CD’s as a buffer… and that safe pretty pension.

I only need $250.00 to open it… and $100.00 to make additional purchases (just like my current fund). I think I’ll take this month’s investment money and open the account and then put $100.00 a month into it for the remainder of the year.

January $250—Moderate Mutual funds
February $250.00 Open Target Date
March $250.00 -> $150 to Moderate, $100.00 to Target Date
April $250.00 -> $150 to Moderate, $100.00 to Target Date
May $250.00 -> $150 to Moderate, $100.00 to Target Date
June $250.00 -> $150 to Moderate, $100.00 to Target Date
July $250.00 -> $150 to Moderate, $100.00 to Target Date
August $250.00 -> $150 to Moderate, $100.00 to Target Date
September $250.00 -> $150 to Moderate, $100.00 to Target Date
October $250.00 -> $150 to Moderate, $100.00 to Target Date
November $250.00 -> $150 to Moderate, $100.00 to Target Date
December $250.00 -> $150 to Moderate, $100.00 to Target Date

Target Date $1250.00
Moderate Mutual Funds: $1750
CD’s: $2,000.00

Why still put $$$ into the moderate account? (Yield is better, and if I ever want to recover what I lost faster, I got to drop money into it now… buy low, sell high… plus if this target date is crud, I still have my other account.) That and I’m a baby steps kind of girl.