This is a continuation of my post titled, Setting up a Roth IRA – 4 Easy Steps (part 1) – Outlining (in 4 easy steps) the creation of my brother’s Roth IRA. Parts 1 and 2 discussed the WHY, now we are going to discuss the how.

Step 3 – Picking a Brokerage Site

If you ever read my About Me Page you may have noticed that I have my Series 6 and Series 63.  Which are the licenses needed federally and in the State of New York to sell

  • Mutual Funds
  • Closed-end funds on the initial offering only
  • Unit Investment Trust
  • Variable Annuities
  • Variable Life Insurance
  • Municipal Fund Securities

So why do I need a web brokerage site?  Because he is my brother and I don’t feel the need to charge him.  That being said, I do not think any financial planner, wealth manager, stock broker, etc. is wrong for charging you, a client, for a service they provide.  While this sentiment might not coincide with most financial bloggers out there, if someone is providing you a service there is nothing wrong with being compensated for said service.  While people should be faulted for not knowing basic facts of their investment plan, no one should be faulted for handing it off to someone else to handle (just like I don’t bother handling my car’s service…mainly cause I am likely to break it!).

To be fair I didn’t review ALL of the options out there, but I had a few minor requirements and then checked some trusted bloggers.  I needed:

  • No Load Mutual Funds
  • No Fees if there is no intial deposit

So I went searching and reviewed these Bloggers’ posts on the Subject:

I ended up going with T. Rowe Price.  I did so because they offered no load mutual funds, and had a ton of funds that do not require an initial investment (which vanguard does on all theirs; the minimum was $1K).  I didn’t choose fidelity because most of their funds require a monthly funding of $100 vs. T. Rowe Price’s $50.  Since I was going to invest $200 to $300 a month, I wanted more options and went with T. Rowe Price.

Step 4 – Picking Funds and Asset Allocation

Considering we dealing with a beginning investor, I felt that he should have a broad range securities.  First thing is first, I have to find out my brother’s risk tolerance (it should be noted that he is 26 years old), so I had him take a bunch of different risk tolerance surveys:

They all came back with similar results – he was moderately aggressive.  This result shocked me a bit! I figured being his brother and a close one at that, I “knew” he would come back ultra ultra conservative.  Well, boy was I wrong.   So, I threw away my gut feelings and went with the surveys and created an equity heavy portfolio consisting of:

  1. Blue Chip Growth    ($50/month)
  2. Retirement 2055 Fund  ($100/month)
  3. U.S. Bond Index ($50/month)

All funds have an expense ration of less than 1% and no fees! Once the portfolio gains traction and actually has some assets I will re-allocate with him possibly getting a little more advanced.

Would you have done differently? Any suggestions would be great!