Vanguard account question

[southernbelle_amy]

Can anyone help me understand the difference between a Prime Money Market Fund and the 500 Index Fund. Basically I started a Simple IRA and split my money between the two, because I don't know what is better. Thanks for any help.

 

[AnnR]

The Prime Money Market Fund is a money market account. 1 share is always worth $1 but you make interest on the account (not much right now!!) It is very safe and usually you can write checks on the account but since your account is an IRA you won't be able to without a tax penelty.

The Index 500 is a stock fund. It invests in the stocks of the S&P 500 -the prices can go up and down daily. It is riskier but because it holds a bunch of stocks it is not as risky as other stock funds. Basically this is an account you should hold onto for a long time. The great thing about this fund is that it's fees are very low, so you are not paying for the people running it.

Hope this helps!

 

[southernbelle_amy]

thanks that does help. I sorta don't know what to do because of the economy right now. But I am 28 so I have a while before retirement so I don't know what would be best in my situation.

 

[bicker]

We're panicked. We've lost almost 40% of our retirement savings due to the economic downturn, and also have no idea what to do. The difference is that my wife, at least, is within ten years of retirement, so if things don't get better quickly, we're sunk. At our age, we're supposed to be moving assets from stocks into money markets, but since we've lost so much, we're staying aggresive hoping things improve so that we can have some semblance of a comfortable retirement. It could back-fire: We could lose even more.

You've got loads of time. Many folks my age didn't have any money to save or invest when they were your age. If I were your age, I'd be far more comfortable with aggressive investments. Even if things don't improve anytime soon, you'll still have a quarter century more time to retrench, start over, and build up what you'll need.