What is an ira? a friend of mines wants me to pull my savings and invest in mutual funds?

what are the pluses and minuses and any recommendations on smith barney, legg mason, american funds etc,,,? how does this work and could i lose my money in this game he keeps saying good stuff about?

Let's answer your question first...an IRA is an "Individual Retirement Agreement", an tax-deferred framework for investing allowed by the IRS. Once invested, you face heavy penalties if you withdraw any funds before age 59.5.

Mutual funds can be OK in an IRA if you have a lengthy time frame for investing, but you will always be exposed to market risk. Ask your broker "friend" about retirement annuities that have down-side protection from loss and no fees. You'll still be in the market, but eliminate the market risk. I'd also recommend a second opinion from a qualified financial professional that isn't a "friend".

Good luck.

You need to do some research that is too long and detailed to write here. Start by reading the book "Investing for Dummies" or "Mutual Funds for Dummies" both by Eric Tyson.

Get a second opinion from a reliable source and do not rely on people from Yahoo! answers....trust me, you don't want to rely on something as important as money on a "friend" unless you have a second opinion.

What works for one does not work another.

An IRA is commonly referred to as an Individual Retirement Account.

It is sorta like an account that you set up to save for retirement. The earnings are sheltered from taxes (I hesitate to get into too much detail about all the ins and outs of IRAs).

An IRA is not really the investment. An IRA is merely an account that holds investments.

Any financial institution can open an IRA for you. Most folks like to invest using mutual funds inside their IRAs so they will typically open an IRA with a financial institution. If you want FDIC insured accounts then you'll need to open an IRA with a bank.

All of those investment firms that you mention have some good and some not so good investment options.

You really run the risk of "losing" your money if you invest in something that you don't understand and aren't comfortable with (do a bit more homework before jumping in). If you chose wisely, then you should do fine.

ira=individual retirement account
You probably want a roth IRA... you can put $3000 a year (as long as you have worked enough to earn an income of $3000 or higher per year (otherwize your maximum is the amount of earned money from your job)

How it works is you put money away in an investment planned for the long term... Like any investment, nothing is guarenteed, but the market in general has never lost money in any 20 yr span, and usually averages a double digit percentage yield...

I'd strongly consider it, but do your own research first and I mean it... you say the word "game", but you would be wise to treat it as a business(not to say that making money can't be enjoyable)

The power of compound interest is tremendous. If you were playing a round of golf and someone bet you 10 cents on the first hole, and doubled it on the second(making it 20 cents), and doubled it again on the 3rd all the way till the 18th hole... you had better be a good golfer because on the 18th hole alone, your bet would be $13,107.20

The downside is that in an IRA you will incur fees and taxes if you want to get your money out early. However if you leave it in until you're 60 years old, that money will be TAX FREE no matter how much you earned.

You can also use your IRA money to purchase your home, and if you know how to take advantage of the right loophole, you can even buy a rental house for investment purposes, but that's another story

IRA = individual retirement account

2 main types:

1) Roth IRA= tax free growth + tax free withdrawals
2) Traditional IRA = tax deductible + taxed at withdrawal

IRAs are just accounts that give you tax benefits for retirement. You can invest stocks, bonds, CDs, money markets, mutual funds, ETFs in an IRA to increase your earnings.

Stocks, mutual funds, ETFs all have HIGH RISKS and you can lose all your money if you don't hire a smart guy to manage it. That's where those brokers come in because they study increasing interests 12 hours a day. ( they promise a higher rate of return than CDs, money market & bonds at 10% - 28% rate of return)

CDs & money market accounts have NO RISKS and you don't lose money from it. They both give you a constant rate of return. They're both FDIC insured, up to $ 100,000. (5% - 6% rate of return, shop around)

Bonds fluctuate and are currently offering low rates also are not insured by the FDIC. They would be in the SEMI-RISKY investments. (3%4% rate of return)