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Investing in Our Roth IRA’s

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As I wrote about yesterday, Mr. BFS and I just fully funded our 2012 Roth IRA’s last week with the last $8800 that we needed to contribute.  I’d love for it to be that easy, but we also had to figure out what to invest in with that cash.  Here’s what we came up with…

Crystal’s 2012 Roth IRA Investments

I’m easy.  I like target date mutual funds.  Specifically, my 401k is invested in Fidelity Freedom 2035 (FIHFX) and my Roth IRA is fully invested in Fidelity Freedom 2045 (FFFGX).  Both returned about 12-13% over the last year and only lost about 25-30% of their value during the crash (not too bad when some people lost 50% or more).  My two accounts have completely rebounded and have even grew some since the crash since that was also when I contributed more cash.

So, the $3800 I had left to contribute to my Roth IRA was used to buy more shares of FFFGX.  It’s probably not a sexy choice, but I like target date mutual funds since they are like investing in a great portfolio that is automatically adjusted to be less risky as time goes on.  I really appreciate smart and easy.

Hubby’s 2012 Roth IRA Investments

Mr. BFS is not as easy as I am.  He likes choosing investments.  That is why he runs our Scottrade account for stocks.  He ended up using his $5000 to invest in two main stocks:

  • Walmart (WMT) – He said he chose this one for $3500 since he thinks it will continue to be a sales leader and they are doing a big, patriotic push in advertising that may go over well.  Their price has also dropped a little over the last 6 months, so he think it would be a good time to buy.  And he likes their dividend and how often they are known to raise their dividend.  Finally, he says we don’t have much other stock in this niche, so it’s diversification.
  • Microsoft (MSFT) – He put the other $1500 into Microsoft since he thinks it also has dropped enough to be a nice buy.  They also have a good divend and history of dividend growth.  And we don’t already have a tech company in our portfolio, so he diversified again.  Plus, the crappiness of Windows 8 has already been factored into the stock and the new X-Box console should be released in the next 18-24 months.

Overall, I’m just happy that we have two fully funded Roth IRA’s for 2012.  🙂  Yay!  But my competitive nature now wants to see how well my target date mutual fund does against his specific investments in 2013, lol.

Do you have a Roth IRA?  What do you invest in?

FYI:  I worked at a dead end cubicle job from 2005-2011 for about $30,000 per year.  I went self-employed in July 2011 and make between $70,000-$90,000 through blogging, professional pet sitting, hubby's reffing, and our rental home.  If you’d like to start your own site (link to my free step-by-step guide), I highly suggest checking out Bluehost (my referral link with a nice discount for you, PLUS a free custom header banner from me!).  Please contact me any time at budgetingfunstuff*at*gmail*dot*com with questions or just to brainstorm! I’d love to help!
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13 thoughts on “Investing in Our Roth IRA’s

  1. I use my Roth IRA to complement my 401(k) since it doesn’t have all the funds I want. So my 2012 Roth IRA contribution will go entirely to the Vanguard Extended Market index fund which complements the S&P 500 index fund in my 401(k). Then my 2013 contribution will go ~98% towards the total international stock index fund and a little dribble to the Extended Market index fund. I’ve got it all projected out already, lol.

    Target date mutual funds are awesome, but (unfortunately?) I want to invest for retirement outside of tax-advantaged accounts and it’s easier to do the math if I mix and match and plus, then I can get the Admiral Shares expense ratios in my taxable account and my IRAs. So I use the individual pieces that make up a target date fund (Vanguard Total International Stock index fund, Vanguard 500 Index Fund, Vanguard Extended Market Index Fund, and Vanguard Retirement Savings Trust) and re-balance by buying new shares. It seems to be working out okay! Oooooh I should make a chart showing what my return is and what my return would have been had I been using just a lifecycle fund that matches my asset allocation, approximately.

    Oops, sorry for the long comment! I’ve been trying to figure out what to do with my Roth IRA contributions for this year, lol.

  2. Do you guys use your Roth IRA’s more like a brokerage account, where you invest money, but if need be, sell some shares and cash out some contributions from time to time?

    Or do you use it more like a 401(k), where once you put your money in there, it’s not coming out until retirement?

    I want to fund my Roth, but it would be from cash that would normally go into a brokerage account. Meaning, that if I needed to withdraw at some point, I could.

  3. Hey crystal – have you ever considered vanguard instead of fidelity? Take a look at the VTIVX – which is their 2045 target. The fees are 1/4th of what the fees are on the fidelity equivalent. And the Morningstar ratings are even better. Fwiw, we have shares in VTIVX =).

  4. I’d put my money on your investments outperforming his. I don’t have a lot of faith in either Walmart or Microsoft. Good luck in your friendly competition!

  5. I have the following funds in my 401K : VIIIX, VMCPX, and VSIIX. The majority of my contribution goes to VIIIX.
    In my ROTH IRA I have: the Vanguard high dividend yield. I’m hoping to add to my ROTH some utilities through the VTU next go around.
    I’m hoping in 2014 after we buy a house and if we are still employed, we can max out the ROTH IRAs, and start a taxable account for short term growth (15 years from now).

    I love Vanguard’s low fees!

  6. I contributed my 2012 Roth IRA funds two weeks ago too. I am more like your husband, I like “rush” I get from stocks. Mutual funds just don’t do it for me except in my regular 401K.

    I purchased the following three stock:
    Amazon (AMZN),Ocwen financial (OCN)and VISA (V).

  7. I too like the target date mutual funds for my Roth. I am thinking about mixing it up in the coming years to reduce my fees, but I just don’t want to have to pay more attention to it than I currently am doing.

  8. @Leigh, yay for a great plan!

    @The Happy Homeowner, me too. 😉

    @Lance, my expense ratio for FFFGX is at .76%, so I was pretty happy too. Now I have no idea what is low or not…

    @Mike, we pretend it’s a 401k but keep in mind that we can take out our contributions if we ever have to…I just really hope we never have to…

    @Mrs. Pop, I just looked. It is better. Now I have a decision to make, crap. 🙂 I don’t know how long I have to leave my new purchases before I can move my shares to something new…I’ll look into that too.

    @Denise, thanks!

    @SavvyFinancialLatina, wow, way to go! Good luck!

    @JFK, good luck with those!

    @20’s Finances, me neither.

    @Tony, wow, Vanguard is getting great reviews in these comments! I need to see when I can switch…

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