thevicenarian.com

Zecco + ETFs = No minimum Roth IRA

Posted by Tad Johnson - Feb 10th, 2008 at 14:02

I’ve heard a few comments from friends and readers of this site that most of the big banks require too high of account minimums for mutual funds in a Roth IRA account. Fidelity requires a minimum of $10,000; Vanguard’s is $2,500. This is a problem for the vicenarian investor with $500 to $1000.

Solution : Zecco.com + ETFs

Zecco.com - Free Stock Trading & Investment Community via kwout

Zecco.com offers free stock trades (10 per month) for accounts with $2500 or more, and very reasonable $4.95 trades for accounts with at least $1. By way of comparison, Scottrade charges $7, E*Trade $12.99 and Fidelity $19.95. Zecco offers regular and retirement accounts, including the Roth IRA.

ETFs (Exchange Traded Funds) work like a mutual fund but trade like a stock. So instead of enforcing account minimums, you can buy any number of shares at any time. You buy ETFs through a broker (such as Zecco) and you’re charged a trading fee on the buy and sell (unless you’re using Zecco and you have $2500 in your account).

There are hundreds of ETFs available in every imaginable market sector. For the vicenarian investor, I think it’s wise to use market index funds for your core retirement accounts. Vanguard (known for low cost funds) offers a total stock market index (ticker VTI) that charges a mere 0.07% expense ratio.

If you’re looking to start a Roth IRA and don’t meet the account minimums for the big banks, consider using a service like Zecco. You can always transfer your account to one of the big banks in the future, so this can be a great way to get started.