As a 19 year old, what's the best way to start investing money from my Roth IRA?
I'm 19 and I have a couple thousand dollars in my Roth IRA, though not a cent is invested in anything. From my research, I believe I'd like to invest a large portion of my assets in an account towards Large Cap Equity. What would be the best way to get started doing so? Is there a better way to invest large scale in the stock market?
Your research instincts are correct. The best first step for you is a large cap equity index fund. Stay away from individual stocks as you don't have the resources to build out a large portfolio on your own. I would suggest that you open a brokerage account with Charles Schwab. Two reasons. Schwab is a large organization that will be able to offer you varied financial services as you progress in life. They also have a suite of low cost indexed mutual funds that you can trade commission free.
Specifically, you should consider the Schwab Total Stock Market Index with ticker symbol SWTSX. It invests in virtually the entire US stock market with a very low expense ratio of 0.03%. That gives you diversified exposure to the US equity marketplace at a low cost. Reinvest your dividends and capital gains back in the fund. Keep all the money working for you.
Good luck and ... glad you started investing early with a Roth IRA.
Congratulations on your commitment to planning ahead for your future. Because you are starting out with modest resources(couple thousand dollars) it may be wise to stick with very low cost ETF's (SPDR or Vanguard). Both SPDR and Vanguard have several different options of ETF's to choose from. They will give you the diversification you're looking for and generally cost much less than a traditional mutual fund or target date fund. Be sure to check the annual expense ratio of whatever fund you choose.
Congratulations on developing your savings habit. Starting young and continuing to save on a regular basis will give you a great chance to build your wealth. For clients like you who are just starting out with a long term time horizon, I usually recommend allocating your initial dollars to an S&P 500 index fund or ETF. As you continue to add dollars to your account, you can begin to diversify into other areas of the market. For someone in your situation, the next investment might be a total stock market ex-US ETF (non-US global stocks) or mutual fund with low costs. Diversifying your portfolio to include a significant allocation to international markets can be very effective as economies around the world continue to emerge and constitute a larger portion of global GDP. As you learn more about investing and become comfortable with the risks associated with stock market movements, you can continue to add different asset classes to your portfolio and build a portfolio that matches your risk tolerance levels and your ultimate goals. I would suggest that you spend some money on a few good investment books and as your portfolio grows, meet with a financial advisor (CFA) who specializes in investments to learn more and to help you think about how you can and should continue to build your portfolio. Many advisors will meet with you on an hourly rate basis and spending a few hundred dollars on a consult with a professional can be good value for money. Best of luck as you begin your investing program.
You'd want to be diversified in your investments. That means different countries, industries and different company sizes. Most brokers have lifecycle funds which are simple to use as you just pick a date fund that is close to your retirement, maybe a 2060 or 2065 fund. Look for low-cost ones, say less than 0.5% annual fee.
Another way is to find index funds or ETFs that invest globally and invest in those, Vanguard if you have access to them. Also important is to know this is for the long run and not change/move funds just because one year or so was bad.
Add to that amount periodically, it's $457/month ($5500/year is the max you can put into ROTH) and don't worry too much about fluctuations. Make sure you don't pay for the monthly trading fees (some brokers offer it when you buy their own index funds- Fidelity is one example). When you get a job (assuming not) then you want to put at least as much as the match of your employer in it. Let me know if need more help.