Roth IRA Fund Options From Merrill Edge

VTI and BKAG are a good place to start

Merrill Edge is a financial platform owned by Bank of America Corp. (BAC). It is a discount broker providing access to online trading, self-directed and guided investing, brokerage, and related services. It was launched in 2010. Merrill Edge had $353 billion in client assets across 3.2 million accounts as if November 2021. Merrill Edge offers more than 2,800 exchange-traded funds (ETFs) and just under 3,000 mutual funds for its customers. However, the company does not provide its own proprietary set of funds.

Investors in the U.S. have access to several tax-advantaged saving plans offered by a broad range of other financial services companies, including 401(k)s, individual retirement accounts (IRAs), and Roth IRAs. The main difference between a Roth IRA and a traditional IRA is that the former is funded with after-tax dollars. That means that contributions to Roth IRAs are not tax-deductible, as they are with traditional IRAs. But unlike a traditional IRA where withdrawn funds are taxed, a Roth IRA allows investors to withdraw funds tax-free.

Key Takeaways

  • Merrill Edge, which was launched in 2010, offers more than 2,800 ETFs and just under 3,000 mutual funds.
  • When making a retirement account, a broad stock fund and broad bond fund provide a good foundation, either as the entire basis for investing or to build upon with more complex investments.
  • Roth IRAs allow you to avoid paying taxes on investment returns by investing after-tax income now.
  • VTI and BKAG can serve as good starting points when looking for Roth IRA investments from Merrill Edge.


All data in the bullet point lists for each fund below are as of March 31, 2022, unless otherwise indicated.

Vanguard Total Stock Market ETF (VTI)

  • Expense Ratio: 0.03% (as of April 29, 2021)
  • Assets Under Management: $279.1 billion
  • 1-year trailing total return: 13.98% (as of March 31, 2022)
  • 12-month Trailing (TTM) yield: 1.33%
  • Inception Date: May 24, 2001

VTI is an ETF seeking to track the performance of the CRSP U.S. Total Market Index. This index includes thousands of stocks across the broad market-cap spectrum. VTI is an excellent choice for a comprehensive, diversified fund that provides access to roughly 100% of the U.S. investable equity market. The fund's managers are Gerard O'Reilly and Walter Nejman. O'Reilly has advised the fund since 2001 and Nejman since 2016. The ETF has 4,070 holdings as of Feb. 28, 2022. These holdings are divided as follows: 66.4% are large-cap stocks, 15.3% are mid-cap, 8.4% are small-cap, 6.6% are between small- and mid-cap, and 3.3% are between mid- and large-cap. The average market cap within the fund is $510.6 billion.

VTI can be used to form the foundation of a Merrill Edge retirement account because it provides exceptionally wide exposure to different stocks compared with similar broad-based funds at its low price point. These rival, broad-based funds include the iShares Core S&P Total U.S. Stock Market ETF (ITOT) and the Schwab U.S. Broad Market ETF (SCHB).

Investors looking for a different approach to broad stock funds may wish to target a large-cap ETF like the iShares Core S&P 500 ETF (IVV) as a primary fund. Then, investors can supplement IVV with a specific small- or mid-cap fund to broaden overall exposure. Another option for a large-cap fund is the BNY Mellon Large Cap Core Equity ETF (BKLC), a free large-cap fund that is on a newer proprietary index called the Morningstar U.S. Large Cap Index. BKLC only has about half the holdings of S&P 500 ETFs, but its lower fees may make it a compelling alternative for some investors.

A broad-based equity fund like VTI provides investors with fairly strong growth opportunities, but it also carries a certain degree of risk. For those with a very low risk tolerance or who are approaching retirement, a more income-oriented portfolio may be a better option.

BNY Mellon Core Bond ETF (BKAG)

  • Expense Ratio: 0.00%
  • Assets Under Management: $285.2 million (as of March 30, 2022)
  • 1-year trailing total return: -4.3%
  • 12-Month Trailing (TTM) Yield: 1.61%
  • Inception Date: April 22, 2020

BKAG is a bond ETF targeting the Bloomberg Barclays U.S. Aggregate Total Return Index. This index gauges the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. BKAG provides investors with broad exposure to the U.S. bond market and has a zero percent expense ratio, making it highly competitive in terms of price point. Nancy G. Rogers and Gregory A. Lee manage the fund and have each served in this role for two years. BKAG's holdings totaled over 2,400 as of Mar. 31, 2022. Roughly 40.3% of these holdings, the largest portion, are Treasurys, followed by 27.8% agency fixed-rate bonds. The remaining roughly 32% of holdings are bonds or other debt securities issued by entities operating in the following market sectors: banking, consumer non-cyclical, communications, technology, energy, electric, consumer cyclical, and capital goods.

Investors often select bond or fixed-income funds because of their lower risk levels relative to equity funds. However, bond funds typically also do not offer the same growth potential, and consequently usually provide lower returns. Bond funds may be most appealing to investors who are risk-averse or who are potentially close to retirement. They can also be a helpful way of diversifying a portfolio. Modern portfolio theory holds that combining a broad-based bond fund and a broad-based equity fund can offer significant diversification to a portfolio, maximizing returns while minimizing risk.

The conventional wisdom surrounding portfolio allocation has suggested that the ideal balance is 60% stocks and 40% bonds. But there are other allocation rules used in the industry. Some financial advisors recommend following the "100 minus your age" rule. So if an investor is 30 years old, their portfolio would be comprised of 70% stocks and 30% bonds. By the time they turn the age of 40 they would have the 60/40 portfolio. These are general rules of thumb and should only be used as starting points. The important thing is that investors choose an asset mix that reflects their risk tolerance as well as their investment time horizon and associated need for growth.

What types of retirement accounts does Merrill Edge offer?

Merrill Edge offers a variety of retirement accounts, including both traditional and Roth IRAs, 401(k) accounts, SEP IRAs, inherited IRAs, and more.

What account fees does a Merrill Edge Roth IRA have?

Merrill Edge account fees are tiered. Roth IRA accounts in the self-directed program do not incur an annual fee and have no minimum investment. Customers do pay a fee of $49.95 to close out the account. The mid-tier Merrill Guided Investing program incurs a 0.45% annual program fee and requires a $1,000 minimum investment. Investing with an advisor requires a $20,000 minimum and an 0.85% annual program fee.

Does Merrill Edge allow customers to directly manage their investment online?

Yes. Merrill Edge offers customers the option to manage their own retirement accounts or to have them managed by Merrill.

The Bottom Line

A Roth IRA offers investors certain tax advantages. Roth IRAs are unique in that they are funded with after-tax dollars and are not taxed when the funds are withdrawn at a later date. In short, funds invested in a Roth IRA can grow tax-free. After opening a Roth IRA, the types of investments chosen will depend on the individual investor's risk tolerance and the amount of time and energy they have to research various investments. Merrill Edge is one option investors can look at when considering how to execute a retirement investment strategy.

For investors with little time and energy, one option is to allocate part of their money to a broad-based stock fund and another part to a broad-based bond fund. These large, diversified funds also may create a solid foundation for investors who do have the extra time and energy to evaluate other, sometimes riskier, investment options. This may involve investments in individual companies or specific niches of the market, such as small-cap stocks.

Article Sources

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