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Q: How do you open an Individual Retirement Account (IRA)?
— C. Martin, New Castle, DE
A: You can open an IRA at your local bank. Just walk in and ask for all the details. You can also open an IRA with any regular or online brokerage firm. An online brokerage firm can also open a regular trading account for you. Try www.sharebuilder.com/black enterprise/index.asp or www.scottrade.com or www.ameritrade.com for low-cost, online investing, and www.tdwaterhouse.com for a good online broker with solid research. Make sure you arrange to have regular contributions made to your account. A little bit every paycheck will keep you on the right track to saving for your retirement. You can contribute up to $3,000 each year; $3,500 if you are 50 or older.
Once you open your account, it is probably best to start with mutual funds. You can select from the thousands of funds available from any of the online brokerage firms or you can ask your bank for help in selecting from the different funds it offers. You should select a range of mutual funds in different categories. I suggest an index fund, which will mirror the market’s performance; a small-cap fund, which will give you an opportunity to benefit from small, fast-growing companies; a mid-cap value fund, which will give you the benefit of companies that may have hidden value; and an international or foreign fund, so that you can benefit from markets outside the U.S.
Before you choose, you will have to review all the information on the different types of funds your bank or online brokerage firm allows you to invest in. You can also look for information on mutual funds at www.morningstar.com.