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My wife and I recently came into money (i.e. I just got a job!). We are looking to open Roth IRA accounts for the two of us. We currently have a brokerage account at Scottrade and my employer retirement is through TIAA-CREF. We are trying to figure out which firm to open our Roth IRA's with (e.g. Vanguard, TIAA-CREF or Scottrade). We have a few questions.

  1. What is the fee structure for TIAA-CREF? I looked long and hard on their website and could not find an explicit description of fees. Are the only fees collected the management fees for their mutual funds?

  2. It appears that you are pigeonholed into their particular TIAA-CREF managed funds, am I right?

  3. Vanguard (htps://investor.vanguard.com/mutual-funds/fees) is more explicit about their fee structure, which I appreciate. It appears that you can purchase their funds and other funds (e.g. even TIAA-CREF managed funds). However it appears that they charge a hefty fee (e.g. $35 for trading TIEIX). To purchase funds other than Vanguards seems to be prohibitively expensive especially if you are trying to cost average and purchasing monthly. Am I understanding this correctly?

  4. Scottrade (www.scottrade.com/online-brokerage/trading-fees-commissions.html#tab2) charges $17 per trade for any mutual fund. This also seems to be expensive if you are cost averaging over 12 months because you'd wind up spending at least $200 / year on fees per mutual fund you purchase and a $1000/year if you were trying to diversify into 5 different funds. Am I correct?

  5. So realistically it seems that if one was to cost average over the year, one would really only want to choose either TIAA-CREF and Vanguard because you can purchase their funds without any trade fees (but of course there are those pesky management fees). So really it boils down to which (TIAA-CREF or Vanguard) manages a set of funds with sufficient diversity that I like, am I correct?

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This answer is somewhat incomplete as I don't have definitive conclusions about some parts of your question. Your question includes some very specific subquestions that may best be answered by contacting the investment companies you're considering.

  1. I don't see any explicit statement of fees for TIAA-CREF either. I suggest you contact them and ask.

  2. There is mention on the site of no-transaction-fee funds (NTF), but I wasn't able to find a list of such funds. Again, you might have to ask.

  3. Vanguard also offers some non-Vanguard funds without transaction fees. If you go the Vanguard page on other mutual funds you can use the dropdown on the right to select other fund companies. Those with "NTF" by the name have no transaction fees.

  4. Scottrade also offers NTF funds. You can use their screener and select "no load" and "no transaction fee" as some of your filters.

  5. You are correct that you want to choose an option that will offer a good lineup of funds that you can buy without transaction fees. However, as the links above show, Vanguard and TIAA-CREF are not the only such options. My impression is that almost any firm that has their own funds will sell them (or at least some of them) to you without a transaction fee. Also, as shown above, many places will sell you other companies' funds for free too. You have plenty of options as far as free trades, so it really depends on what funds you like.

    If you google for IRA providers you will find more than you can shake a stick at. If you're interested in low-cost index funds, Vanguard is pretty clearly the leader in that area as their entire business is built around that concept. TIAA-CREF is another option, as is Fideltiy (which you didn't mention), and innumerable others. Realistically, though, you probably don't need a gigantic lineup of funds. If you're juggling money between more than a handful of funds, your investment scheme is probably needlessly complex. The standard advice is to decide on a broad allocation of money into different asset classes (e.g., US stocks, US bonds, international stocks, international bonds), find a place that offers funds in those areas with low fees and forget about all the other funds.

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