Q: I have a small IRA that I have in certificates of deposit at a local credit union. The interest rates are low low and I am willing to move the funds.
But I need advice about where and how. Are there funds that will take my small contributions of $500 at a time? The total balance of my regular IRA is $22,300. I am still working and will be turning 60 this year.
A: Many discount broker platforms now offer no-commission purchases on basic exchange-traded funds (ETFs).
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So dealing with minimum starting and additional investment amounts has become a nonissue. Your account has enough in it that you could make initial investments in traditional mutual funds. You would have no problem adding $500.
You will need to transfer your IRA from your credit union to a firm that offers a brokerage “platform.” The platform could also be a mutual-funds supermarket.
If you are comfortable online, Vanguard will be the most flexible choice for low-cost investing.
But if you would like some direct contact and help from a person you can see, you’ll feel better visiting a Schwab or Fidelity office.
Q: We have about $1 million invested through a financial planner that we have done business with since the mid-1990s. Until the last couple of years we have had a cordial financial relationship with this firm.
But I was not satisfied with the way our portfolio was going in light of a good market. I started asking why the lack of movement. The best response I received was, “What do you want us to do?” I told them to make money! My perception was that they were sitting on the portfolio, afraid to invest, so there was little movement.
We will be meeting with this firm for our annual review, and I would like to have the right questions to ascertain what we are paying and what we have gained or lost through their oversight. They provide pretty graphs, etc., but I don’t think we are being provided the true picture on fees, return, etc.
A: Having little activity in an investment account is more likely to be a good thing than a bad thing. Transactions can mean expenses and taxable events, such as capital-gain realizations.”
You have two big assessments to make. Your adviser should have the information. The first is the risk assessment of your portfolio. Once you have that, you can measure your portfolio against a comparable risk peer group.
The second is the total cost of management for your money. The total cost includes the expense ratios of any underlying mutual funds or exchange-traded funds. Then add the management fee you pay to the adviser.
Some people believe that expenses don’t matter if your after-fees return is good. The reality is that performance is transitory, but expenses are forever.
If your adviser blows you off or makes you feel awkward, take it as his way of telling you he is incompetent and that you should find another adviser.
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