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I am looking towards depositing about $700~$1000 of it in something that will hopefully bring in some good interest returns, and at least something that does a lot better than my current "savings account".

My family resides in the same city that I'm in, and they encourage me to do start investing my idle money as well, and told me not to worry about an emergency fund.

I barely spend any money on a regular basis, so the leftover $500 or so after placing the rest in investments is sufficient for everyday needs (I'm also going to pick up a part-time job next semester at my university that will allow me to receive a little bit more pocket change).

Also, I am currently a full-time student with a lot of extracurricular activities, so I was hoping to find a plan that has minimal requirements on how much you need to actually spend time researching about the day-to-day, or week-to-week fluctuations of the market.

If a Roth IRA is good enough, and other options are only marginally better, we were thinking that the Roth IRA was the safest and conventional way to go about things...

Thanks.

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Perhaps what I'm looking for is something that's more of a compounded-interest savings plan than an actual high-risk, real-time investment scheme that requires you to be on your toes... –  Joseph G Dec 19 '11 at 17:35
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Are you working? You have to be working to have a Roth IRA I believe. –  MrChrister Dec 19 '11 at 17:48
    
@DarkTemplar - The brokerage (or mutual fund company, or whatever) will report any IRA (Roth or otherwise) contributions to the IRS. There's also a line on your 1040 for declaring IRA contributions. I'm pretty sure the IRS will flag it if they don't match, and your taxable income must equal or exceed the contribution amount. –  Rick Goldstein Dec 19 '11 at 21:18
    
@RickGoldstein - That does not sound good.... even if I do end up saving all of the money I earn from the part-time job in the spring, that won't be nearly as much as the $1500+ I have now that I gathered in the past from sources anything but taxable income.... should I just forget the Roth IRA altogether then? –  onaboat Dec 20 '11 at 5:57
    
@DarkTemplar - Not sure I understand. You don't have to save that much from your income. If wages before taxes (FICA/Medicare/witholding) and after pre-tax deductions (as for health insurance) exceed the IRA contribution for the tax year, you're good. A couple of hundred hours at minimum wage (10 weeks at 20 hrs/week) should be enough to cover $1500, regardless of whether you spend your actual take-home pay on food and rent. But if that income will be in 2012, don't try to open the IRA until 2012, since funding in 2011 would require 2011 income. (Disclaimer: I am not a tax attorney.) –  Rick Goldstein Dec 20 '11 at 17:58
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3 Answers

Your question seems like you don't understand what a Roth IRA is. A Roth IRA isn't an investment, per se. It is just a type of account that receives special tax treatment.

Just like a checking and savings account are different at a bank, a ROTH IRA account is just flagged as such by a brokerage. It isn't an investment type, and there aren't really different ROTH IRA accounts.

You can invest in just about anything inside that account so that is what you need to evaluate. One Roth IRA account is as good as any other.As to what to invest your money in inside a ROTH, that is a huge question and off-topic per the rules against specific investing advice.

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Hmmm... just curious, then.. where did you go to open up a Roth IRA? Was there a reason or two that made you decide to go to that company instead of the others that are out there that provide Roth IRA accounts? –  onaboat Dec 19 '11 at 19:08
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I have two. One that my employer picked (Fidelity) for my work plan. I also have a separate one with Schwab. Though my choice had nothing to do with the ROTH itself, they are all the same. I just liked their prices and web-site tools. Pick a broker you like and go with them. –  JohnFx Dec 19 '11 at 19:11
    
I see so you're saying that in the grand scheme of things, the name or identity of your broker does not matter at all, right? You mentioned something about liking their prices, so I was wondering how that would come into play...? –  onaboat Dec 19 '11 at 19:41
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@DarkTemplar - the name of the broker has no meaning whatsoever. What matters is the services the broker provides. Some provide no-fees-trades for certain funds and under certain conditions, others charge less or more on ETF trades, etc. For example, Etrade charge $14.99 per trade (IIRC), while Scottrade charge $7 per trade. While you can invest in exactly the same stocks with either of them one will cost twice as much as the other. Is it worth it? E*trade has a much better (IMHO) platform for trading. Would I pay twice as much for that? No. Would you? Only you can know that. –  littleadv Dec 19 '11 at 19:46
    
Ok so it looks like I'll probably have to look into the details of each broker from here on. It looks like there won't be a clear-cut, easy answer to this and the best option may end up being just randomly pick one, and go with it instead of trying to find the broker that will squeeze out the most optimal deal/plan –  onaboat Dec 19 '11 at 21:12
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You are young, and therefore have a very long time horizon for investing. Absolutely nothing you do should involve paying any attention to your investments more than once a year (if that).

First off, you can only deposit money in an IRA (of whatever kind) if you have taxable income. If you don't, you can still invest, just without the tax benefits of a Roth.

My suggestion would be to open an account with a discount brokerage (Schwab, Fidelity, eTrade, etc). The advantage of a brokerage IRA is that you can invest in whatever you want within the account. Then, either buy an S&P 500 or total market index fund within the account, or buy an index-based ETF (like a mutual fund, but trades like a stock). The latter might be better, since many mutual funds have minimum limits, which ETFs do not. Set the account up to reinvest the dividends automatically--S&P 500 yields will far outstrip current savings account yields--and sit back and do nothing for the next 40 or 50 years. Well, except for continuing to make annual contributions to the account, which you should continue to invest in pretty much the same thing until you have enough money (and experience and knowledge) to diversify into bond funds/international funds/individual stocks, etc.

Disclaimer: I am not a financial planner. I just manage my own money, and this strategy has mostly kept me from stressing too badly over the last few years of market turmoil.

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Long-term investment is definitely the issue at hand here :) –  onaboat Dec 19 '11 at 19:08
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You're young. Build a side business in your spare time. Invest in yourself. Fail a few times when you have some time to recover financially.

Use the money that you would have let sit in some account and develop your skills, start up an LLC, and build up the capacity to get some real returns on your money.

Be a rainmaker, not a Roth taker.

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