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From: jam@ho95b.UUCP (Joe Malecki)
Newsgroups: net.invest,net.taxes
Subject: Re: IRA Choice
Message-ID: <296@ho95b.UUCP>
Date: Thu, 24-Jan-85 15:38:37 EST
Article-I.D.: ho95b.296
Posted: Thu Jan 24 15:38:37 1985
Date-Received: Fri, 25-Jan-85 21:41:56 EST
References: <7510@brl-tgr.ARPA> <394@spp2.UUCP>
Distribution: net
Organization: AT&T Bell Labs, Holmdel NJ
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Xref: watmath net.invest:516 net.taxes:626

Probably one of the best vehicles for an IRA for a person in his twenties and
thirties is a growth mutual fund.  That way you get the advantage of the
growth of the securities in the fund, along with the distributions of any
dividends.  If you want to see the dollar amount you have in the fund grow
instead of just the long upward trend in the value of the stock prices,
consider a "growth and income" mutual fund.  In addition to stocks, they
usually invest in fixed obligation investments such as bankers' acceptances,
CD's and the like. Annual returns from growth mutual funds is almost always
better than straight interest.  If the market does well, your return can be
quite high.  In the boom market year of 1983(?) some funds posted returns of
60%, while even the dogs were around 20% or more.  Interest rates on CD's
were only around 13% or so.

Basically the strategy for a young person is to achieve capital GROWTH.  As
you get older you want to start pulling in a little so that your nest egg is
not subject to swings of the market. Finally, you want to become risk-free as
you approach and enter retirement. Then you concentrate on INCOME from, say,
treasury securities or GNMA funds. 

The reason you want a self-directed IRA is so that you can follow the
long-term strategy outlined above. You can always do better in the long run
by diversifying  in a (or several) mutual fund instead of getting only
interest from a bank CD.