7 Places to Open Your First IRA

Opening your first IRA can be intimidating. In addition to deciding on investments, retirement savers must first decide where to open an IRA. Unlike a 401k set up by an employer, an IRA can be established at brokers, mutual fund companies, and even banks.

The first step in deciding where to open an IRA is to decide how you want to invest your retirement savings. Here are several common options:

Mutual funds and ETFs: Particularly for those just starting to invest, mutual funds are a common choice. They offer instant diversification, minimal ongoing maintenance, and low cost. For the mutual fund investor, opening an IRA at a specific mutual fund company (see some options below) is a wide choice. In addition, there are automated investment services (sometimes called robe-advisors) that can help investors manage portfolio by automating the rebalancing of a portfolio.

Stocks and Bonds: Those wanting to invest in individual stocks and bonds will likely open an IRA at a low cost online broker. The top online brokers offer a wealth of tools and resources, and trades typically cost less than $10. Brokers are also ideal for those wanting to buy and sell options or ETFs.

Certificates of deposit: For those wanting to invest in CDs, banks are an ideal option. CDs offer low volatility, but also very little in the way of significant returns. In fact, there after-inflation returns can be negative.

With the background, here are some good options for your first IRA.

7 Great Options for Your First IRA

Scottrade: This online broker combines low cost trades with a network of physical locations. It's ideal for those wanting to trade stocks, and it also offers access to over 14,000 mutual funds. Scottrade currently is offering up to a $2,000 bonus on new accounts.

E*Trade: A second brokerage options is E*Trade. It has no account minimum, which is helpful when first starting to save for retirement. E*Trade makes trading really easy, and gives you access to helpful of research and guidance. It can be a good option if you want to learn to trade on your own and to have ultimate control over where your money is invested.

TradeKing: The final broker in our list, TradeKing is ideal for higher-frequency trading. It has relatively low stock and options trading fees, making it a better option than E*Trade for higher-frequency trading.

Vanguard: Turning to mutual funds, Vanguard popularized the low cost, passive investing using index mutual funds. Investors can select specific Vanguard funds or invest in target date retirement funds. With target date funds, Vanguard effectively manages the portfolio, shifting the allocation toward bonds as you near retirement.

If you have at least $1,000 on hand to start with, you can invest in the STAR Fund. It has a relatively low expense ratio. The STAR Fund is invested in about 62% stocks, which can make it a good long-term, high-yield investment if the stocks do well. Because it's a huge mutual fund company, Vanguard can offer lower fees and easy investing options like target-date funds, which automatically adjust your risk as you near retirement.

Ally: This bank operates exclusively online, and is thus able to offer low fees and good return rates. If your goal is to invest in CDs, online banks may be the best option for this reason. Right now, Ally's high-yield CD offers 1.2% APY on an 18-month investment of less than $5,000. Have $25,000 or more to invest? You can boost your interest rate to 1.3% APY. That's still not a huge return on your investment, but it's not bad for an 18-month certificate of deposit.

Betterment: This online service is an automated investment service. If you want to be a bit more hands-off with your investment decisions, it's one of the best options out there. When you start an account with Betterment (with no minimum deposit), you'll go through their quiz to determine your current risk tolerance. Betterment will automatically build a portfolio made up of ETFs.

Betterment services cost a relatively low percentage, and they offer lots of tools to track your investments and make great investing choices. You can make your own choices, or rely on its software to balance your portfolio for you.

Wealthfront: If you're really interested in an automated investing service, you might compare Wealthfront to Betterment. Like Betterment, Wealthfront determines your risk tolerance and then creates a balanced portfolio for you. It offers options in real estate investment trusts, ETFs, and commodities. The additional options can be great if you're looking for a high-yield investing portfolio.

Unlike the other options listed thus far, Wealthfront requires a $500 minimum deposit. On the upside, it charges no management fees on the first $5,000 invested.
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