Choosing Funds for My Roth IRA

I'm trying to decide on another T. Rowe Price fund for my wife's Roth. My plan is to reduce my SIMPLE-IRA or at least contribute more to my Roth. I thought I might be able to shoot for maxing out both Roth and the SIMPLE-IRA (higher than a regular IRA contribution maximum, $10,500). Then I realized that my dear wife could also have a Roth that I could contribute to and more of OUR money can grow tax-free. So the better option would be to fully fund her Roth as well. But that is still a ways down the road to consider.

Some of the cynics out there might be thinking "but what if you split up?" (Or is it "?, I always forget.) The truth of the matter is she will get it anyway, even if she runs off with her boyfriend. Divorce is a bitch, make sure you don't marry one. But my wife asked me to move in with her when I was unemployed, homeless, and without even a car. After one date. I'm pretty sure she's not after my money. And no, she was neither desparate nor homely, we just hit it off. But I digress.

As I have said before, I'm concentrating on paying off some debts, but I think it is good to get an IRA opened up so that the channels are in place to ramp up later. That is what I like about T Rowe Price, they will let you open an IRA without a minimum investment for only committing to a $50 contribution a month.

Until more debt is paid off, I'm going to put the minimum investment into one fund, and my wife will put one into another. Then as we pay off debt we will both add another fund to diversify our portfolio, I'm thinking emerging market or international. Hopefully we can add them at the same time, and then have an "IRA race" between them.

So in the spirit of just going out there and getting started, I opted to just go for what Dave Ramsey generalizes to a "good growth stock" mutual fund. With barely more research than a quick lookover, TRP's Growth Stock (PRGFX) fund seemed appropriate for those goals. After later researching it, I could have done worse. It has a good Morningstar rating, gotten some good press in Kipplinger, although there is also the downside of a recent manager change.[UPDATE: The MarketWatch guy said sell it. Now ain't that just my luck. This is why I don't gamble.]

I also had to figure out how to make contributions on her IRA. Was I able to direct it from my account? Did I have to get my Luddite better half to sign up and just give her a check if I wanted to contribute? A quick call to a friendly TRP operator got my answers for me. She sets up her own account, but then we can establish "trading privileges" between us. I didn't explore that further but was satisfied it could be done, Luddite's not withstanding.

But for my wife's Roth, I thought I might want to go with another fund, but with the same general criteria, a "good growth stock mutual fund" from T. Rowe. Under consideration:

PERSONAL STRATEGY GROWTH (TRSGX) - Stats and press seam good. High turnover rate (85%!). Composition has 15% in bonds. This is their "Lower risk" growth stock mutual fund. Morningstar gave them a 5.

BLUE CHIP GROWTH (TRBCX) - Along with Spectrum Growth, comparable to Growth Stock (PRGFX) in TRP's ranking in terms of Risk/Reward. Large Cap. Turnover rate ~ 30%. 91% Domestic stock, 9% foreign.

SPECTRUM GROWTH (PRSGX) - Split 25/72 foreign against domestic stock. Very low turnover rate (4.5%). This is because it actually is composed of holdings of TRP Funds. A fund of funds. This is why they have a low turnover rate. The funds they hold do it for them. It is a "one-stop approach to broad diversification". What I don't get is the high expense ratios. I would think that a fund composed of in-house funds that don't turnover much would have a lower expense ratio. But I don't run a mutual fund. This guy with a 'III' in his name does, just like Thurston Howell. If I need to link who that is, it probably dates me. :-)

MidCap Growth (RPMGX) is closed to new investors. I won't even bother.

NEW AMERICA GROWTH (PRWAX) High Turnover rate (59%). Kind of a high expense ratio for the returns (0.89%).

The "Riskiest Funds" according to this:
DIVERSIFIED MID-CAP GROWTH (PRDMX) - A very young pup with not much of a track record. Slightly lagging the Lipper index for Mids. A VERY HIGH expense ratio (1.29). Turnover rate is ~30%.

DIVERSIFIED SMALL-CAP GROWTH (PRDSX) - Ditto but a little older. Heavily lagging the Lipper Index for Smalls.

There are probably many other "growth stock mutual funds" that I just didn't consider because they didn't have 'growth' in their name. But why complicate it too much? I don't have to pick the best one, just a good one. Best is the enemy of good enough when the real enemy is time.

This is also not a sound investment strategy, it was merely a goal. Open a Roth IRA was the important thing. Armed with a little knowledge and maybe I can do well enough. But I'm positive that it is better than doing nothing.

Because I'm just not quite sold on the Fund of (in house) Funds that is Spectrum Growth, I think I'm going to decide between Personal Strategy Growth and Blue Chip Growth. I might revisit one of the alleged "risker" funds later as we diversify. Or I might consider putting Spectrum Growth up against EQUITY INDEX 500 (PRSGX) in our next "IRA race". I have read or invented in my mind having read that too much diversivication in mutual funds is really just getting yourself to the point of being spread across the market like an index, except you pay more for it. So maybe we shall see.

But that is for some other late night.