Roth question...

[nalto]

Since you guys seem to be the gurus, I have a question. I'm planning on opening a Roth in the coming days/weeks, but I'm a little hesitant because I'm a bit nervous the market may be taking a dive soon.

Should I not worry too much and just do it? Or should I wait a bit longer? Thanks!

[yclept]

Assuming it makes sense in your overall retirement planning, open it. Having the brokerage account open does not mean you have to make investment decisions immediately. You can leave it in "cash" which means the broker will put it in a bank or money market funds -- you won't get much interest on it, but it won't be worse than it would earn in your regular savings or checking account. Even CDs are not returning much of anything nowadays.

[2kids10horses]

Open the Roth, and fund it.

Then figure out what you want to invest in.

If you are afraid the market will tank, (who knows? It may soar!), only invest a portion of you funds in your chosen investment vehicle. In 3 months, invest another portion. 3 months later, another portion, and so on.

This approach is called "dollar cost averaging" and is an easy way to get your money invested and avoid buying at the "High".

That gets your 2010 money invested.

You can fund your 2011 money in by making regular monthly contributuons, and purchase your investement with each contribution. The dollar cost averaging will happen automaticly.

[phil5185]

but I'm a little hesitant because I'm a bit nervous the market may be taking a dive soon.

It depends on your time horizon. If this is money that you will use 30 yrs from now, $5000/yr at 11%/yr is $1,100,000. If your first $5000 incremental investment (your 2011 contribution) drops to $2500, that cuts your final fund by $57,000 (still over a million). Or, if the 2011 market jumps and your $5000 becomes $7500, your end-fund will be $1,157,000. So, very little effect on your 30-yr fund.

You can also think of $5000 per as 'dollar cost averaging", it doesn't have to be monthly, it can be quarterly, semiannually, annually.

[2kids10horses]

I agree with Phil and wxyz. I'm either "all in" or "all out" I was suggesting to the OP that if he's afraid of looking like a fool and investing at the top, to dollar cost avg in.

401k generally make you dollar cost in as they invest monthly. A ROth you can manage as you wish.

(Often my "all out" is really "all short", LOL!)

[nalto]

Thanks everyone!