I know nothing about investing except that I know I should be doing it. I have deep anxiety about and I know I’m an idiot so please be helpful (you don’t have to be kind).
I started investing and maxing out my ROTH IRA 5 years ago. I didn’t realize I had to choose what type of fund to put it in so I guess the default was VMFXX. I logged in last month to see my 4.5% rate of return.
My questions are:
(1) Do I have to “sell” by entire VMFXX funds in order to “buy” into a new fund?
(2) Will I get taxed/penalized for selling?
(3) What fund should I invest in? High risk? I am 45 years old. VOO?
For anyone worried about me, I do have a few hundred thousand invested in VFIAX and VWENX, so I don’t think I’m a total disaster?
My ROTH IRA has been sitting in a VMFXX for 5 years and I only just realized
byu/gloriamuntz inpersonalfinance
Posted by gloriamuntz
4 Comments
1. Is it referring to the funds as a “settlement fund” or showing the amount under “funds available to trade”? If so, you don’t need to sell. Otherwise, you probably do. Who is the account with?
2. No. There is no tax/penalty for transactions as long as the money stays within the Roth IRA.
3. See [https://www.reddit.com/r/personalfinance/wiki/investing/](https://www.reddit.com/r/personalfinance/wiki/investing/)
> (1) Do I have to “sell” by entire VMFXX funds in order to “buy” into a new fund?
If VMFXX is your “settlement fund” (which seems likely, as that’s the default setting at Vanguard) then no, you don’t have to explicitly sell anything. Any buy order will give you the option to pull from the settlement fund.
> (2) Will I get taxed/penalized for selling?
Not inside a tax-sheltered account like a Roth IRA.
> (3) What fund should I invest in? High risk? I am 45 years old. VOO?
https://www.reddit.com/r/personalfinance/wiki/iras#wiki_eli5.3A_how_should_i_invest_within_my_ira.3F
For future reference it’s Roth not ROTH. It’s not an acronym it’s named after someone.
>(1) Do I have to “sell” by entire VMFXX funds in order to “buy” into a new fund?
VMFXX is a money market fund, meaning it’s structured as a cash equivalent. It’s designed to be very safe and maintain a price of exactly $1/share, and pay monthly interest.
Vanguard’s brokerage system uses VMFXX as the “settlement fund”, meaning that it basically acts as the cash in the account. You do not need to sell in order to buy things with it.
>(2) Will I get taxed/penalized for selling?
No. The whole gimmick of retirement accounts is that there are no taxes/penalties/whatever for making transactions or realizing gains within the account.
Also, since money market funds maintain exactly $1/share, you’re generally not going to be carrying unrealized gains with them. Even in a taxable account, there usually wouldn’t be any consequences for selling.