Sometimes Youth Makes For More Affordable Aggression

Q. Two years ago I was just out of college and went to my bank to open a Roth IRA. I knew very little about investing but suggested to the bank's financial advisor I was wanting something like an indexed mutual fund and was just going to let the money sit there for thirty years. He suggested this #### Growth Fund instead. I said sure and later found out he put me in a variable annuity with this #### Growth Fund.

From what I can figure out, this seems to be a poor choice for me, but not for him. Is there any way I can redirect my money in a few more years to something else (i.e. a low fee index fund) and still keep it in the Roth and not have to pay any penalties? Or can I and should I just get out of it now with applicable penalties?

The amount is only $3000. Thanks for your time in answering this. I guess it's better to learn a lesson with $3000 at 26 then $300000 at 66.

A. Even though you had to pay a commission to get ####, it is an excellent mutual fund that consistently beats the S&P 500. The internal fees on this fund are almost half of what they are for most actively managed mutual funds. You probably won't see this fund on the top ten list, but it will always stay in the top 25% of it's category.

Let's see what will happen to that $3k if it earns only 7% per year...
7 years = $6k
14 years=$12k
21 years=$24k
28 years=$48k
35 years=$96k
42 years=$192k
49 years=$384k

At 10% it's considerably better. I would not be concerned if I had my Roth money in #### and expected to be able to leave it there for 10-20 years. You will be happy.

Let me give you another one. Since you are so young and will not be depending on this money for income you can be more aggressive with it. What do you think the chances are that the S&P 500 will be higher 10-20 years down the road? The probability is about as close to 100% as you can get.

If that's the case and you believe it, then take a look at #### if you make a contribution this year. #### is designed to produce 200% of the daily return of the S&P 500. So if the S&P 500 goes up 10%, #### will go up 20%. Don't bet the farm on it, but with your time-frame it will be hard to lose. The only caveat is that you will have to have the stomach to hang on to it when the S&P 500 is down 10% and #### is down 20%. You are concerned about where it will be in 10-20 years, not 10-20 months.

Thanks for your question!

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