you have a couple of things confused here.

IRA's (Roth or Traditional), and 401k's and 403b's, are "tax-advantaged" containers which hold investments. depending on which type you have, all have a degree of Teflon which insulates them in some manner from the IRS, either now, later, or both. hence the term "tax-advantaged".  IRA's can be opened at the likes of Fidelity and Vanguard -- the term for this service is "IRA custodian".  (incidentally, using a bank as an IRA custodian is generally a bad idea from an investment costs and options perspective).  

contrast a "tax-advantaged" container to a "taxable" container, such as a regular brokerage account or even a generic savings account. in this case, your yearly gains (interest, dividends, and capital gains) are reported to the IRS and you are taxed on them at certain rates depending on the type of gains and your tax bracket. if in a taxable account you buy 10 shares of Apple at $100 and sell 10shares at $200, the IRS is going to want part of the 10x$100 = $1000 gain that you have.

taxable vehicles are generic investment accounts (which include brokerage accounts holding a variety of instruments) are exposed in the sense that the IRS is going to take their cut every year -- either in terms of capital gains (e.g., from the profit on a stock sale) or ordinary dividends (from holding bonds or CD's).

which one is better? neither. you will not be able to avoid having both. contributions to tax-advantaged vehicles are limited by IRS rules to prevent them from being tax havens for the 1%. for example, the 2014 IRA contribution limit is US$5500. what if you have more than that to put into long term investment? the overflow goes into taxable vehicles.

in general, you will want to contribute to tax-advantaged vehicles first, and then into taxable vehicles.

nevertheless, what i am trying to get across here is that an IRA (Roth or Traditional) is a container, aka an account, and not an investment per se. you place money, which are called contributions, into an IRA and then you choose what investment(s) that money should be directed into. such investments include stocks, bonds, mutual funds, and so on. "cash" is also one possible type of investment, in this case it is held in a money market fund.

ANY tax-advantaged account at ANY investment firm will have a "cash" or "cash equivalent" (e.g. money market fund) option. were you to sell a security inside an IRA, for example, the proceeds have to go somewhere, and that somewhere is cash -- inside the IRA. it is impossible NOT to have a cash "slush" or sweep inside the account. if, for example, you had an IRA and you believed the market was going to take a dive, you could sell your holdings (stocks, mutual funds, etc) and leave the cash (= cash equivalent, e.g. a money market holding or "sweep" fund) in the IRA.

summary:
IRAs, 401k's, 403b's, etc --> containers, like a juice glass.
mutual funds, stocks, bonds, etc, --> investments that go into the containers, like orange juice.

to repeat: an IRA account is NOT an investment –– it is a container, like a glass. in the glass you can put orange juice or milk or soda, or a combination of things like vodka and cranberry juice.  

as is the case with most folks, you may find yourself with two or more types of accounts -- some taxable (like your savings and brokerage account) and some tax-advantaged (like the 401k at your current employer, and IRA's (roth or traditional) -- including IRA's rolled over from a prior 401k). in general, to lessen your tax burden during your working years you will want to place income-producing securities (like dividend producing stocks, taxable bonds, and REITS) inside your tax-advantaged account, and place common stocks and ETFs in your taxable account.  this is all part of a strategy called "asset allocation", which has been shown to be THE major contributor to long term investment success.

Fidelity, Vanguard, and T. Rowe Price are all good places to open an IRA, or rollover a prior 401k into an IRA.  all of these custodians offer a multitude of investing options within their IRAs. Fidelity, for me, gets the nod -- i have my taxable and IRA accounts there. my reasoning for suggesting Fidelity includes their excellent web interface, superior customer service (ask anyone in the industry, they will tell you Fidelity's customer service is the best in the business), and Fidelity's breadth of investment options (aka Fund supermarket). also, Fidelity charges no (ZERO) yearly administrative fee for an IRA account -- all of your money goes to work for you.

do not, under any circumstances, open an IRA through a bank unless you completely understand the fee structure –– and it is completely free. there are at least three companies, listed below, that offer no-annual-fee IRA's AND have thousands of no-load mutual funds/bond funds to choose from. there is simply no way your local bank can compete in breadth of offerings nor costs with these companies.

https://www.fidelity.com/ira/
https://personal.vanguard.com/us/whatweoffer/ira
http://individual.troweprice.com/public/Retail/Retirement/IRA

most IRA administrators have 1 of 2 ways to open an IRA account;
1) $2500 minimum
2) $250/month via automatic deposit (bank transfer) until the $2500 minimum is met.



everyone starts off like this. but, the first time you saw an AR15, and started to take it apart, you also had no idea what to do. and now, you can not only do it in the dark, but you can explain to others how it works and why it works the way it does. investing is no different. in the beginning, it looks like an immense set of unrelated gears in a giant transmission. for this reason i dissuade you from concluding that it is "not-understandable" –– like most complex things, long term investing is made up of simple building blocks. which brings me to...

for more information, here are the only three investing texts that you will ever have to read:

The Four Pillars of Investing, by William Bernstein
The Bogleheads Guide to Investing, by Taylor Larimore et al
All About Asset Allocation, by Richard Ferri

with those three books under your belt, you will be ahead of 99.99% of all long term investors. these texts are straightforward to read and designed for normal folks -- they are not math books.  they are easy-to-read texts which explain long term investing with lots of practical examples. when, where, how, and why to invest in various investment vehicles during various periods of your life, and more importantly what *not* to do as well.

it is my belief that whether you choose to self-manage your long term investments /or/ pay someone to manage your long term investments you should have an understanding of how it is all supposed to work –– what options are available, what strategies are prudent at various life stages, and how the risk-vs-reward balance is attained. otherwise, you are truly deer hunting in the dark –– and as a result the odds of coming home with venison are basically nil.

ar-jedi

Why did it take this long for the correct answer?



 

12 years ago I asked myself the same question and the answer was 40 shares of Apple.

corrected above.

IRA = individual retirement account.

role of IRA custodian = do paperwork.
role of IRA account holder = manage investments INSIDE the IRA.

the following applies to ANYONE with an IRA:

if you think your historical IRA performance is poor, it's your fault.  own up to it, and decide to do something about it.  

YOU control the contents (the orange juice) of an IRA account (the glass).  the guys who are performing a custodial role (Fidelity, Vanguard, Prudential, etc) are doing the accounting.  that's it.

if the fee structure of the custodian where you have your IRA is poor, or the breadth of the investment options available inside the IRA is poor, or the website that the IRA custodian offers makes MySpace look modern, or ANY OTHER REASON YOU ARE NOT HAPPY....  it's simple: move the IRA.  

moving an IRA is so easy it is stupid to wait 10 more minutes.

steps:
1. you open IRA account at your newly desired IRA custodian (Fidelity, Vanguard, T.Rowe Price ALL offer no-annual-fee IRA accounts (Traditional and Roth).  you can do this though the website of these custodians.
2. you request your new IRA custodian to do a "transfer in kind" from your old IRA account.  you give them the account numbers, and transfer permission.  in some cases you are going to have to sign a document and send it to them.
3. you wait three days.
4. you are done.

there is no cost, no IRS penalties, no fees, no nothing.  the very same IRA holdings you had at old custodian A will be with you at new custodian B.

ar-jedi

clearly it must be obvious to you that the OP you are replying to is not an accredited investor.

ar-jedi

investing while you are young -- especially tax free investing -- puts the power of compounded returns in front of you.

you can wait until you "have enough money" when you are 30, or 40, or 50, etc, to start investing -- but with the attitude you have above you'll never think it's enough.

luckily 87 million examples of why this is exist on the web...

ar-jedi

join date, march 2010.

hmmm.

you have been on ARFCOM long enough to have seen ammo go down in price.   and likewise, guns.

ask all the folks who bought $750 cases of M193 or M855 what they think of their "investment".
ask all the folks who bought $2000 AR15's what they think of their "investment".

ar-jedi

MUX   sell at $3    








 

Obviosly you and I know this. It was intended for the usual folks here that preach fidelity, vanguard any other no load brokerage and precious metals. I should have done a better job at explaining that. I was attempting to play devils advocate, albeit I did a pretty bad job at it.

But that long post you made did a good job at expalining the difference between account types and investment types.

I don't see how putting all your money into guns and bullets sit just as speculative if not more than holding a single equity.  You are heavily banking on an extreme political event to occur in order to see capital gains.

I'm glad she turned me away then.

symbol AKS

Wow. Thanks for that post. I'm following what you're saying. I guess it's just a matter of picking where I want to open the IRAs, and picking what that money should be invested in. Then, when I max out my contributions for this year, I get to pick out investments for my regular money.

You're really good at explaining it. I've been doing research on and off for several years and it never was that clear.

it really is pretty much that simple.  in most cases "KISS" (keep it simple and stupid) works best in long term investing.  the three IRA custodians i listed above all offer a huge assortment of options in their respective "fund supermarkets"


ok great.  that said, i really suggest that you at least get a copy (or kindle version) of Ferri's All About Asset Allocation.  it is a straightforward read and you'll come away with a much better understanding of HOW to structure your long term investment money, and WHY to place certain investments in your taxable and non-taxable accounts.  you have obviously heard of the "risk spectrum" but there are very simple techniques you can employ to reduce overall investment portfolio risk.  some of them are quite easy to understand and implement -- such as avoiding over-concentration in a single asset class (e.g., recall dotcom stocks).  other techniques are a matter of your age.  and finally, some approaches are necessary because you simply can not fight the rotation of the world.  

ar-jedi

i tried to explain this concept, completely unsuccessfully i might add, about 6 times in this thread:
http://www.ar15.com/forums/t_10_17/676681_The_best_way_to_buy_large_amounts_of_silver_gold_without_compromising_your_OPSEC.html

plus, when people are guaranteeing that silver is going to go up, i'll take some of that action!
http://www.ar15.com/forums/t_1_5/1670086__2000_to_invest__Update_on_page_5_.html&page=1#i49556017

ar-jedi

It's like beating a dead horse. I get asked the question about PM's all the time. It's always the same line over here. The economy is going to tank be prepared, blah blah blah, your paper promises are going to suck. etc.

Newsletter needed.



 

Ammo and mags.  Fuck the stock market.

So you telling me the stock market is the only place to invest?

Please enlighten me as to how all of those mags and ammo is going to provide you income for when you don't want to work anymore?

Well for others, invest where you will.  I have investment in my companies and assets within those companies as well as industrial real estate through 3 different Corporations and LLC's.
If I decide, and that's a big IF, to stop working, I am covered.  But I may follow the footsteps of my grandfather who worked until death.  If my daughters are interested, they can be a part of the company.  If not, and I decide to try to live the easy life, I'd sell and consult....i.e. continue to work.  I would prefer to earn a living until the day I die as long as my mind and body allow.  Call it a disease, call it stupid.  But I cannot fathom retiring....because to me that would be a death sentence.

My maternal grand pa is the same way. We will find him at his desk one day. Owning a company like you do is a different animal within itself. For most people though, they work a job, save in a 401k and then need those funds to pay for stuff.

I'll do that. I've taken a handful of finance classes. They were awful but I do have some familiarity with terms, at least. I'll look at the three links. Any reason why TD Ameritrade isn't in your list? I'd pretty much settled on them last go around, based on reviews of sites for novice investors and because my BFF is on there and it would be fun/practical to have someone to talk to about it.

Silver...and maybe some Raytheon (cruise missles are expensive)

i don't have any firsthand experience with TD Ameritrade.  the three i listed above are the ones i do (and not, incidentally, because i moved my accounts around; my wife's 403b [401k for educators] plan custodian is T.Rowe Price, etc.)

Fidelity does have the largest fund supermarket, though.

see
http://www.ar15.com/forums/t_1_5/1628800__ARCHIVED_THREAD____I_need_to_start_saving_for_retirement___Where_do_I_start_.html&page=1#i47482651

ar-jedi

Hey, wouldja look at that! Thanks for that link.

I would invest it in a liter bike down payment, but that's how I roll.

well quite obviously the market for ammo and mags will serendipitously peak during his retirement -- in fact, stay at a peak for the entire duration of his retirement -- ergo, he can sell 30 rounders for $1500 each and 1K cases of M855 for $10,000 each.  

i really don't understand why this approach isn't completely obvious as a viable long term retirement investment scenario.  

ar-jedi

The highest probability scenario is that the OP grows old and dies. Somewhere between when his body no longer allows him to work and death, he will need some cash, not more Pmags.

ar-Jedi already mentioned Rick Ferri. He is a contributor and posts regularly on the Bogleheads forum. He is ex military and has a focus on helping regular people invest smartly.

Google Bogleheads. Read their forum, read their wiki, maybe read their book.

That's speculation not investment. I would even say the same about silver and gold.

Some of you are forgetting that op has a grand to invest.  We have every financial expert on here with half a chub for investment advice for a grand.   So in 30 years hell op might have 9 grand.  Smfh.

well nowt that you explain it to me that way, I think you are on to something.

I think we all assumed op was not going to drop in 1k and then forget about it.

Is there any type of investment that pays over 10% a year?

Most of the ROI that have been listed is pretty pitiful.

Invest in a company that makes medical masks like 3M. The coming Ebola panic will make you rich.

well what do you expect modern portfolio theory. The whole basis behind it is to use averages of past returns in order to make a consistent return and to limit the standard deviation (risk) of the portfolio. 95% of the work done behind MPT ETF investing is figuring out your allocation. I.E. Stocks to bonds., based on risk tolerance. Since returns of publicly traded securities tend to revert to their mean don't expect double digit returns year after year after year.

Can you clarify what you mean by this part?

 

I should have clarified some more. I was talking about index's mostly but most securities can look like that also. For example, it is very rare to see a chart of an Index that just goes straight up with out pull backs, dips etc. Just type in a symbol and pull a chart on it. Then dissect the returns over periods of time. Some periods will be + some will be negative. It is one of the pillars of the buy and hold group regarding the inability to time the market.

Everyone learns differently but ONE way that might work for you is to learn by doing.  Open up an IRA with an online broker (ETrade, TD Ameritrade, Merrill Lynch, ect) and fund it with $500.  Buy a couple stocks to start and pick some big names that you know.  The Dow 30 list is a good place to start:

http://money.cnn.com/data/dow30/

Sit back and then follow your monthly statements to see how it works.  The questions will come up at a less than rapid fire pace so you'll have the ability to tackle one thing at a time.  What's a P/E ratio?  What's a dividend?  Why do earnings matter?  Ect...

I specifically recommend buying individual stocks before getting into mutual funds.  Mutual funds are likely where you want to end up but they are ultimately comprised of individual investments like stocks and bonds, so I think it is important to understand the fundamental units of what you will be investing in before you start dumping money into mutual funds.  It's like learning how to cut a board or hammer a nail before you start building a house.

Now before anyone chimes in with "OMG, Woodsie, it's so inefficient to buy stocks in lots of $100 to $200 at a time", please remember that the purpose of this exercise is to get familiar investing.  So what if she sucks up $10 to $40 in commissions to get her $500 invested?  It's worth it to figure out what you are doing with small dollars before you invest big dollars and $10 to $40 is a small price to pay for an education.

OMG, Woodsie, it's so inefficient to buy stocks in lots of $100 to $200 at a time.

ar-jedi

Lighten up, it's a thought exercise.  

That's great if the stocks do, ok to well, if they tank then that person would undoubted be cynical to the market for a long time. Just playing devil's advocate. Maybe a sim account for individual stocks first.

There are investments out there that pay that and more but risk goes up accordingly.

The floor these days is something like a 1 Year CD paying 1%.  If you want to do better, you need to accept some risk.

The earnings yield of the S&P 500 is 5.1% today but I can't promise you that your investment won't be worth less in a year.

That's why I recommend starting with Dow 30 stocks as they are mostly stable companies with long track records of profitability.  It's very unlikely she'd get beat up that bad even in a down year.

Sim accounts are great, but they don't fully simulate all the mechanics of investing including how to fund an account or how to deal with tax implications plus nothing holds a person's attention like real money on the line.

I started when I was 13 years old with $1000 and lost everything but that didn't stop me.  If I had given that money to my parents and had them invest it for me, then I probably would have gotten cynical but the act of doing it all by myself bred a bit of understanding and with that understanding I was able to recognize that my loss was something that I controlled, not something that was thrust upon me by a cruel arbitrary market.

If a person goes through this exercise and comes out jaded on the other end, investing probably isn't for them anyway.  You have to either have or develop the right mentality in the first place in order to succeed over the long term.

there are tons of investments that have the potential to return more than 10% in a given year. (*)

ar-jedi













(*) correspondingly, there is also the likelihood that these same investments will result in a -10% return (or worse) in a given year.

you can always protect your downside, but it always comes at a cost.

There are many parallels today with 1929.  Anyone who is serious about investing in stocks should read John Kenneth Galbraith's The Great Crash 1929.  

I don't think the crash will be this year but the Chair of the St. Louis Federal Reserve did say that interest rates should go up in the first quarter of 2015.

You need 100 shares of stock to really get in. That being said
Buy-
Waste management incorporated - garbage is big business, it's good no matter the economy. I should have bought it when it was cheaper.
You won't buy it anyways...

so what you are saying is that rates are going to be high enough to warrant a rotation out of equities back into fixed income? But then FI is going to get hit hard by the effect of duration, so then where are you going to go? We didn't even hit euphoria yet where the retail guys get in at the peak of the cycle of the equity bull market.