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Old 02-01-2012, 12:29 AM
 
85 posts, read 354,675 times
Reputation: 45

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Hey Everyone, I currently own some stocks I have done well on, which I am considering selling and funding my IRA for 2011 (just opened it). I currently own XOM (up 45%), PFE (up 40%), GE (-3%), and NLY (-3%). More then anything everything I currently own is paying dividends, so I figure it would be smarter to move things into a Roth, even after transaction fees and taxes. Is this smart/ best move

My 401k is currently 95% stocks and I continue to fund it even though the options are dismal at best (IMO). So I was considering putting money into my Roth in some sort of bond or treasury fund, I'm guessing that some sort of correction in the market will come, and since the bulk of my 401k is in stocks it would be wise.

Sorry for the long post, but any suggestions for bonds or treasury funds? I already opened an account with Fidelity. I would also consider healthcare related, energy, and or consumer staple funds. Like I said I'm a bit hesitant to jump into any of these sectors at the present time as they are at high levels. I'm also very aware of dollar cost averaging

Thanks
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Old 02-03-2012, 09:54 AM
 
Location: SE MO
231 posts, read 593,678 times
Reputation: 160
By all means you should open a Roth and fund it. A Roth is often a better idea than a traditional IRA b/c earning are tax free. Unless you intend to actively trade in the Roth, I would suggest you use a more diversified approach using mutual funds or ETFs. You are at significant risk in your 401(k) by having so much in stocks. A decent portfolio approach for both the Roth and 401(k) could be:

Domestic Equities - Large Cap, Mid Cap and Small Cap - three different MFs or ETFs that target these groups
International Equities - something that targets all world ex-US and another targeting emerging markets - two MFs or ETFs
Real Estate - any one of the REITs MF or ETF will do - you might also consider a REIT high dividend stock but it may be a short term (1-2 yrs) buy
Nat Resources/Commodities - your choice. Two ETF or MF that targets these areas
Domestic Bonds - pick a couple you like. I like the high yield exposure and another good corporate fund/ETF I don't do treasuries b/c the lower yield.
International Bonds - Pick one MF/ETF you like
Cash - Always have cash on hand

This portfolio will give you 12 different funds/ETFs spread across 7 categories. For younger folks up to the age of 40-45, maintain an allocation at around 8.33% in each fund/ETF. As a person moves into the 45-50 range, start weighting the bonds heavier.

I like MFs/ETFs for the diversification factor and this is very important in a retirement account. I also use REIT stocks in addition to the MF/ETF. Its a matter of earning 18-20% vs 5%. You just need to watch the interest rate closely and be prepared to bail as interest rates go up. AGNC is one of my favorites. It sells for $29.50 +/- and pays $1.40/qtr in dividends. That's about 18.9% and in a Roth, its tax free.

Hope this helps.

Dave
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Old 02-06-2012, 03:46 PM
 
85 posts, read 354,675 times
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^ thanks for the suggestions. Even though my 401k investment options are subpar, I still like to fund it. I believe 401k is the only investment vehicle which protects against BK, lawsuits, and divorce settlements. Even though I'm not in the middle of any of those (thank God), something to think about. I have almost 30 years left till retirement, but I'm currently doing fairly well income wise, so might as well start funding.

Probably a dumb question... I realize I have till April to fund my Roth for 2011, but do I have to actually make investments in April to count for 2011? Or can I just transfer money there and make 'real' investments after the deadline?

thanks
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Old 02-06-2012, 10:47 PM
 
8,994 posts, read 13,017,381 times
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Quote:
Originally Posted by James202 View Post
Probably a dumb question... I realize I have till April to fund my Roth for 2011, but do I have to actually make investments in April to count for 2011?
No

Quote:
Originally Posted by James202 View Post
Or can I just transfer money there and make 'real' investments after the deadline?
Yes
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Old 02-07-2012, 07:50 AM
 
Location: SE MO
231 posts, read 593,678 times
Reputation: 160
Quote:
Originally Posted by James202 View Post
^ thanks for the suggestions. Even though my 401k investment options are subpar, I still like to fund it. I believe 401k is the only investment vehicle which protects against BK, lawsuits, and divorce settlements. Even though I'm not in the middle of any of those (thank God), something to think about. I have almost 30 years left till retirement, but I'm currently doing fairly well income wise, so might as well start funding.

Probably a dumb question... I realize I have till April to fund my Roth for 2011, but do I have to actually make investments in April to count for 2011? Or can I just transfer money there and make 'real' investments after the deadline?

thanks
A 401(k) can be touched during a divorce. Judge can award spouse a portion of the account. Cash is an investment. You only need to open the account and put cash into it by April. You can spread the money around at any point afterwards.
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