It's sometimes said that March comes or goes like a lion, but as every taxpayer in the land surely knows, it's really April that roars.
For too many of us, the first week of the cruelest month is spent scrambling to make sure we have all of our, ahem, documents in order; the second is spent in a headlock with tax-prep software or, perhaps, with our father-in-law's trusty accountant/golf buddy, who crunches the numbers while regaling us with long-winded tales best reserved for the 19th hole.
The good news
But the good news about the tax-filing deadline -- which falls on April 17 this year -- is that you have until that date to make your IRA contributions for the previous tax year. But just because you can put it off until then certainly doesn't mean that you should. Indeed, if you want to be smart and deliberate about your investment decisions (and you know you do, Fool), now's the time for all good investors to come to the aid of their portfolios.
With that in mind, I encourage you to take a look at the Fool's Champion Funds newsletter service, which is available to you completely risk-free. Your guest pass even provides access to the newsletter's back issues, so you'll be able to peruse all the funds I've selected thus far -- any of which, by the way, could make terrific picks for your IRA.
In the meantime, here are two quick-and-dirty ways to make smart IRA decisions fast. We'll call 'em the no-brainer and the brainer.
The no-brainer
Two words: index funds.
In a pinch, index funds such as Vanguard 500 Index (VFINX) and FidelitySpartan Total Market Index Fund (FSTMX) can be tough to beat. These funds track venerable benchmarks (the S&P 500 and the Wilshire 5000, respectively), and their portfolios feature the built-to-last likes of Coca-Cola
And these days, of course, index funds come in all shapes and sizes. Worthy mid- and small-cap entrants are available, as are popular exchange-traded funds (ETFs) such as the S&P-shadowing SPDRs (SPY), the Dow-tracking Diamonds (DIA), and Cubes (QQQQ), an exchange-traded fund (ETF) that rises and falls with the fortunes of the tech-heavy Nasdaq 100 and therefore with such titans as Apple Computer
So if it's really down to the wire and you need to write that IRA investment check, you could do worse than an index fund or ETF.
But then again, you could also do a lot better. Who, after all, wants to make a decision as important as the allocation of your annual IRA dough in a last-minute pinch? No one, that's who. For that reason, we bring you .
The brainer
As big a fan of index funds as I am, I'm a bigger fan of assembling a portfolio that includes both actively and passively managed picks.
Why so? Well, just as small-cap stocks sometimes outpace the big boys -- and just as value sometimes trumps growth -- indexing and active management frequently trade pole positions. Indeed, over the past five years, the typical actively managed fund has trumped the S&P by a sizable margin.
And that's just the typical actively managed fund. Imagine the possibilities if, when you went fund shopping, you brought the same kind of analytical rigor to bear on funds that some folks bring to stocks.
Actually, you don't have to imagine. That's precisely what we do each month in the pages of Champion Funds. I highlight both index picks and Championship-quality funds that are actively managed.
What makes a Championship mutual fund? Such funds sport talented stock pickers with long-term track records of success. They also have reasonable price tags. Indeed, the average expense ratio of the funds I've recommended to subscribers hovers around 1%; the industry's typical entrant will ding you roughly 1.5%.
So when searching for the actively managed fund for your IRA, make sure the manager is seasoned and the price tag is below average.
That's my tack at Champion Funds. Performance-wise, the newsletter focuses on the long haul, and while we just celebrated our second anniversary last month, our funds are already delivering the goods. Indeed, my picks have collectively bested the S&P by more than 12 percentage points. So, if you're currently contemplating where you should plunk down 2005's $4,000 contribution limit, check out a free trial of Champion Funds.
And in the meantime .
Don't wait until tax-filing day is upon you to make your IRA contribution decision, OK? If you're anything like me, you're going to be busy enough as it is.
This article was originally published on March 1, 2005. It has been updated.
Shannon Zimmerman runs point on Motley Fool Champion Funds, the newsletter that strives to beat the market while putting the fun back in fund investing. Shannon owns shares of Fidelity Spartan Total Market Index. Dell and Coca-Cola are Inside Value recommendations. Dell is also a Stock Advisor recommendation. The Fool has adisclosure policy.
