Bad IRA Investments

Terry:
After nearly 4 years with TD Ameritrade, a Roth IRA account I have (about $27,000) has not increased in value. Each year has been a lose, whether markets up or down. They put in Cash, Northern Lights, Americh High Income trust and Oppenheimer Sr. Floating rate.

Since frustrated by no growth I think I want to reinvest elsewhere. Any suggestions? I am 70 and retired. Wife 65 and retired. We want to be smart about it but can’t stand losing money.

SAVAGE SAYS: Ah, there’s the problem — your last sentence:? “can’t stand losing money.”? If the broker at TD Ameritrade heard that requirement, you would be invested in safe, secure, “chicken money” investments — and since they pay less than one-quarter of one percent these days, of course you would have seen “no growth.”? You can’t have growth without taking some risk. Once you understand that basic principle, you can examine the actual investment that were made for you.

As I look at the list, and I am not familiar with most of these, I see that you paid commissions to get into most of these investments. That immediately dug into your investment, so it’s hard to get ahead. (The broker made money, not you!)? And, the high income trust and floating rate note funds do carry a degree of risk — both credit risk and risk that their market value will fall when interest rates rise.

I’m going to suggest that you contact either Fidelity or Vanguard or T. Rowe Price and ask them to facilitate a “rollover” of your IRA to them. They have all low cost, no commission funds. And they will advise you on a balance of safety and growth. You and your wife likely have 20 years to live. And you need some growth to keep up with inflation. But it should be conservative growth. And by keeping about 40 percent of your money in a money market fund, you won’t be tempted to sell the growth part of your portfolio every time the market takes a dip!? So my best advice would be 40 percent in a money market fund, and 60 percent in an equity-income fund. But when you talk to the advisors at any of these fund companies, they may learn more about your specific situation and give you slightly different or better advice.