Roth IRA & Schwab ETFs
Since I finally starting working and now have a salary, I thought it was a good time to start contributing to my retirement account. I set up a Roth IRA at Schwab, where I also have my checking, savings, brokerage, and credit card. I do have some medical school debt but have decided to try and contribute the max to the IRA each year regardless. The reason is that if you miss a contribution you forever lose out on that compounding in the future.
Since I don’t have much money to invest, I’m looking for an investment that I can contribute into monthly. Individual stocks are out at this point because the commissions would run too high. I’m also hoping to diversify. An option without commissions and the possibility of diversity is a mutual fund. Schwab has a bunch of great no-load mutual funds. However, there is a small management fee with any mutual fund. Another option for diversification are Exchange Traded Funds (ETFs). You can buy and sell them like stocks, but each share is a representation into a diverse holding of companies like a mutual fund. (And like mutual funds they have a small % fee as well but one that is typically less.) Since ETFs trade like stocks, the regular commission applies to each transaction and, thus, they aren’t really the best for small regular contributions. However, upon doing some research tonight, I found that Schwab has a great deal for clients with a Schwab brokerage account: ETFs with the lowest expense ratios in their categories plus commission-free online trading. This means I can invest a small amount monthly into Schwab’s ETFs without wasting any money with commissions!! It’s going to look pretty small for awhile, but it will be fun to see it grow over the years.