Roth IRA - Need Help

[Jason1]

Hmmm, well I am in an investment class right now so I should know this stuff. That being said, I'll probably only get a C in the class, its pretty tough. I dont know a lot about Roth IRA's, that being said, I would say dont worry too much about a high amount of risk...there's a rule that basically states that young people shouldnt worry about risk, because any bad years will be offset by good years, as long as you have enough time to let that happen, which you obviously do...now I wouldnt say the same thing about someone who is 50.

[Professor S]

If you're not planning on retiring in 5-10 years, go agressive. The economy works in cycles, and during down markets like this, aggressive buying gets you more for the money.

Basically, your buying equities that are "on sale" and are pretty much guaranteed to pay off in the future. Thats why I actually increased my contribution this year, because I get more the same money, and when the market gets better, I'll decrease my contribution back to normal levels. When it comes to investments, never pay retail

Also, keep in mind that inflation averages 3% a year. So if you opt for a safe Money Market or Stable Bond fund or the like that only gets betrween 2% and 4%, you'll like just be breaking even 30 years down the line and take out exactly what you put in with no profit. Meanwhile, aggressive (equity) investing averages about 8% return over 20-30 years, but had more risk in the short run, as we have seen.

Go agressive, and when you hit 50, start thinking about where your money is depending on when you'd like to retire, but always redistribute investments in a hot market, so you're sure you're making the most of your money when you sell off your equities for a money market or stable fund that pretty much guarantees return that just hedges inflation, but with no or little risk of loss. And make sure that whatever it is, its tax deferred.