Roth IRA - Need Help

[Professor S]

Originally Posted by manasecret

For some reason the meaning of 'equity' in my mind doesn't associate with stocks. But if that is the accepted nomenclature, then ok. By equity fund, do you mean a mutual fund that is based in stocks?

Stick funds are called equities, becauase you are purchasing equity in the companies by purchasing stocks.

Normally different houses have funds that are diversified, but diversified within the stock market, and each fund may do better or worse than one another. I can't speak on what funds within equities are better than another.

[/quote]So the idea for someone young like me (24) would be to put the majority of my money into stocks. Do you count stock market index funds as equity? From what I've read, index funds give me the opportunity of investing in aggressive equities without worrying about two things, 1. Having to know a lot about the stocks I'm choosing, and 2. The fact that any individual stock I choose may go under. Do you agree with buying index funds?[/quote]

An index fund is one that is VERY diversified in the stock market. Basically, in an index fund you buy a little of every stock on the market, so you go as the market goes, percentage for percentage.

Personally, I don't like them because they are just as risky as other more carefully managed equity funds, and they bring 2% less on the whole, averaging only about 6% a year in the long term last time I checked.

If you don't mind disclosing, what percentage do you personally have in equity over the more stable bonds?

I don't invest ay all in stable funds. All my money goes straight into aggressive, because the odds that I will ever realize the loss we are experiencing right now are very low due to my age (31) since I'm not planning to retire until 60 or so.

Okay, so you mean a few decades from now when I'm closer to retirement I should move my money to more conservative funds, but only when the market is doing well. For example, if I was the age of 50 now and was looking to retire in the next few years, right now with the market the way it is would not be a good time to move my investments over.

Bingo, n that case you should push retirement back a few years until the market is hot, and then cash out when the time is right so you realize the entirety of your investment.

Are you worried at all? Do you think the market will return to its initial highs again?

Of course I'm worried, but not much. Even during the great depression the markets bounced back, and on a percentage basis over the last 40 years the booms have been astronomical while the recessions have been small in comparison. To give an example, we have lost almost 50% of the stock market's value, but thats from a 300% or so high from the last down market. Boom times are also far longer than recessions over the last 40 or so years.

I remember back when 9/11 happened, people said the DOW would never be above 10,000 again. Like all financial naysayers in history, they were wrong.

[/quote]So what does your portfolio generally look like? Do you like to choose and pick specific stocks or do you stick to equity funds?[/quote]

I never pick stocks, I let the pros do that. I pick over funds, and only aggessive/equity funds and I make sure I have a good investment house. Right now I have John Hancock running my portfolio, and they have averaged higher than most houses when the market was good.

While I have gleaned some info over the years, please talk to a professional about your plans, as I have dedicated my investing at the moment in my 401k and in Real Estate (my house), and I am a layman in both categories.