d_teller

Are ETFs or Mutual Funds Better For a Roth IRA Account?

Interesting perspective. Re Fido's trading of open-ended mutula funds: the No_Fee status of a fund can disappear. ADVDX (Alpine) was an NTF last year, but not now. It would cost $75.00 to purchase or sell right now. On the other hand, FIREX (Fido's Intl RE fund) doesn't have a charge, but its history is relatively short, and NAV's been declining, because global interest rates are rising.

Regarding Investing for the long-term in a Roth IRA, one needs to look at a long-term trend of a sector, before putting $ in a lump.

One big problem with OEM's, is they pay CG & Divs, when their NAV'S have risen, and if one reinvests at that point, you're buying high. From 2000 to recently, REIT valuations have risen (out performing the broad S&P), because money was cheap, borrowing costs were low, and inflation seemed to be a diffuse, periodic threat. That's now changing. If you want dividends to grow your Roth's valuation, you may only see 2-4% for domestic REITS vs the 5-7% extant in the beginning of this decade.

There are some companies in the REIT arena that pay better, (and they're not weeny caps) : Thornberg Mortgage (TMA) pays about 10% (buy it below 26.00); AINV (Apollo Investment) is a business development Co. with ca. a 9 % yield and it's got a long and successful history. They buy and sell companies, but unlike some private equity and partnerships, they have structured to pass through some 70% of their earnings. The field is enormous, and if one has access to Thomas White, Lehman or Yahoo, one can look at the comparison ranking of the subsector of the REITs. One can also access general info (the category of the REIT) at NAREIT.com.

When interest rates rise above 6% on the 10 yr Treasury, REIT valuations will probably be lower for the Mall, Office and even Apt. Real estate subsectors. I've had REITs in my IRA's for 30 years: sold some in March for astronomical gains (more than 10 yrs of expected dividends), but only certain Health Care/Medical office owners seem to be maintaining the prices of this winter.

In summary, I wouldn't buy a CEF or ETF in real estate now. I might purchase an individual security (stock) in a subsector.