Stupid IRA Tricks

If you have a 401(k) at work you are limited to the investment options that your company offers.  If you have an IRA your options are much greater.  But greater doesn't always mean good, especially if you are just starting out. 

Investments that ARE allowed are:

Bonds

Limited Partnerships

Mutual Funds

Real Estate as in tax liens, property, real estate investment trusts (REITS)

Stock (public and private)

Investments that ARE NOT allowed are:

Collectibles (art, rugs, stamps)

Life Insurance

S Corporations

Your Business (owned by you or a relative before IRA set up)

Your property

If you want to cut to the chase, your IRA or 401(k) should be invested in mutual funds.  Just starting out you don't have the time or money to screw around with real estate, limited partnerships, or individual stocks or bonds.  And all that other stuff like S Corps and collectibles aren't allowed anyway so don't worry about it.

Keep it simple.  If you have IRA or 401(k) issues or questions, read Category 12-Investments--All You Need To Know on the right hand column.  Basically just use Vanguard or Fidelity or T. Rowe Price or Dodge and Cox or whoever your company offers and set up a portfolio that looks like this--70% S&P Index, 15% Small Cap Index and 15% International Index. 

If you like international more than the S&P, then overweight a little.  Same with small caps--if you like them, overweight a bit.

BUT DON'T DO NOTHING.  Don't become paralyzed by the process.  Go to your HR department and find out what is out there.  Actually, go to the web site which they should have about 401(k)s and read it.  If you don't understand it, find somebody in the company that does or go to HR.  If you don't have a 401(k) plan, call Vanguard or Fidelity or any fund company and they will help you.  If you are still confused, write me.

A friend said a very wise thing yesterday.  He tells his kids to do something today (career move, investment, relationship) that will help them get where they want to be in THREE years.  Because nothing good happens over night.  Bad things can happen overnight but good things need time to grow.

And they can't grow if you don't plant them so do something about that today.