Roth IRA Fund Options From Merrill Edge

VTI and BKAG are a good place to start

Fact checked by Vikki VelasquezReviewed by Ebony HowardFact checked by Vikki VelasquezReviewed by Ebony Howard

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.

Bank of America, which owns Merrill Edge, had $476.1 billion in client assets across 3.9 million consumer accounts as of June 30, 2024. 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 United States 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. This 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 But unlike a traditional IRA, where withdrawn funds are taxed, a Roth IRA allows investors to withdraw funds tax-free.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 exchange-traded funds (ETFs) and just under 3,000 mutual funds.
• When making a retirement account, a broad stock fund and a broad bond fund provide a good foundation, either as the entire basis for investing or to build upon with more complex investments.
• Roth individual retirement accounts (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.

Vanguard Total Stock Market ETF (VTI)

• Expense Ratio: 0.03% (as of Apr. 28, 2023)
• Assets Under Management: $1.7 trillion (July 31, 2024)
• One-Year Trailing Total Return: 28.05% (as of August 24, 2024)
• 12-Month Trailing (TTM) Yield: 1.34% (as of August 24, 2024)
• 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 capitalization (market cap) spectrum.

VTI is a popular 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, Walter Nejman, and Michelle Louie. O’Reilly has advised the fund since 2001, Nejman since 2016, and Louie joined in 2023.

The ETF has 3,673 holdings as of July 31, 2024. These holdings are divided as follows: 67.7% are large-cap stocks, 13.9% are midcap, 8.2% are small-cap, 6.2% are between small-cap and midcap, and 4% are between midcap and large-cap. The average market cap within the fund is $837.8 billion.

VTI can be used to form the foundation of a Merrill Edge retirement account because it provides 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-cap 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 Solactive GBS United States 500 Index TR. BKLC has about 500 holdings, but its zero fee 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.

$476.1 billion

The total value of consumer assets managed by Bank of America, the parent company of Merrill Edge.

BNY Mellon Core Bond ETF (BKAG)

• Expense Ratio: 0.00%
• Assets Under Management: $1.84 billion (as of August 23, 2024)
• One-Year Trailing Total Return: 8.58% (as of August 24, 2024)
• 12-Month Trailing (TTM) Yield: 3.75% (as of August 24, 2024)
• Inception Date: April 22, 2020

BKAG is a bond ETF targeting the Bloomberg U.S. Aggregate Bond 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 0% 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 totaled more than 4,734 holdings as of July 31, 2024. The largest portion of the holding, 43.24%, are Treasurys, followed by 25.41% fixed-rate agency bonds. The remaining 31.35% of holdings are bonds or other debt securities issued by entities operating in the following market sectors: banking, consumer noncyclical, communications, technology, energy, electric, consumer cyclical, and capital goods.

Investors often select bond funds 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—consequently, they usually provide lower returns. Bond funds may be most appealing to investors who are risk-averse and/or potentially close to retirement. They also can 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: If an investor is 30 years old, their portfolio would be composed of 70% stocks and 30% bonds. By the time they turn age 40, they would have the 60/40 portfolio.

These are general rules of thumb and should be used only 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, simplified employee pension individual retirement accounts (SEP IRAs), inherited IRAs, and more.

What Account Fees Does a Merrill Edge Roth IRA Have?

Merrill Edge account fees are tiered. Roth IRAs 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 that they have to research various investments. Merrill Edge is one option that 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.

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