It's great that you are looking into your best options. Before I get into specifics about what to do with the money, let me stress that you're in trouble if you are counting on this $10,000 and SS to get support you in retirement in 20 years.

If you earn 7% after inflation (which is not a sure thing at all), you'll have about $40,000 in 20 years. Assuming that you spend 5% of that each year, you'll draw a whopping income of $170/month plus your SS. Whatever you do with this $10K, realize that you need to save a lot more money before you retire.

Anyone that wants an upfront load of 5% is insane. You are correct in assuming that those fees are huge.

Vanguard is a great choice. They have very low fees and good investing options. Vanguard isn't the only good choice, but they are definitely one of the best.

There really isn't a lot of difference between the three funds that you mention. They are all index funds that invest in US stocks on a capitalization weighted basis. Because of that, even the total market index has most of its money invested in larger stocks. The main difference between the three is that the 500 has a bit more exposure to mid-sized companies than the Large Cap Index and the Total Stock Market Index has still more exposure to still smaller companies.

Normally at 20 years to go before retirement I would advise you to start diversifying your assets rather than keep them all in the US stock market. You would put some money into bonds and some into foreign stocks. Others might even include money markets and commodities into that list. With $10,000, it's hard to really diversify much. I would either put it all into a total stock market index fund like the first on your list or split it between a total stock market index fund and a foriegn index fund.

I would choose Vanguard because they have very low fees. They also have a broad array of other offerings that can help as your grow financially. Honestly, you could probably do about as well with Fidelity, Schwab, or any other discount broker that has a low cost broad market index fund.

Far more important than where you invest this $10,000 is the question of how you are going to catch up on your retirement savings. With only 20 years remaining, you need to do several things. First, start saving a lot more money. I'd make it at least 25% of your income at this point. You may also want to rethink your retirement age. Full social security benefits probably won't start for you until you are 67. I don't know how old you'll be in 20 years, but if it's younger than 67, consider working longer.

I would second the choice of Vanguard. I chose them because their rate structure is among the lowest yet they still offer a wide range of investing options.

Some of those options will include non-U.S. investments and bonds. You should spend some time on the Vanguard Web site. There's more than enough information to get you started on what your options are. One choice that will simplify investing for you (at the "expense" of not being quite as flexible as it could be with more of your time and effort) are Vanguard's "Target Retirement" funds. Pick the year you anticipate retiring and they invest your money in a diversified group of funds.

BTW, I speak only as a satisfied Vanguard customer; I don't make any money from referrals. :-)

Oh, and jose is correct: if you plan to retire in 20 years, you really need to be saving more money than you are now. The Vanguard site also can help you determine how much more money you'll need to retire when you plan to.

Thanks jose and steve for the confirmation and advice! I like the idea of VanGuard or Fidelity and will check out both more thoroughly.

I actually have about 25 years to retirement and will be increasing my retirement savings each year. Would love to save 25% but my income is low and I'm already living rather frugally (not a shopper, no vacations, no credit card debt, 3 month emergency fund)! For the last 4 years I have been saving (IRA/Roth) just over 10% of my gross income. My income is low enough that I have qualified for the maximum Saver's Credit (which is why some savings is in an IRA and some in a Roth).

In the next year I will be re-entering the regular world of work (after being self-employed for 15 years). And while I have earned a living and loved being self-employed I have decided to do this so that I have better health insurance plan and work for a company that offers a 401K with a company match.

My total saved is about $10,000 and the split is actually about $4000 in a regular IRA and $6000 in a Roth IRA. My thoughts are that I should invest the $4000 IRA in something that is relatively stable and I should invest the $6000 Roth in something that offers the opportunity for a greater return (especially since there is no tax on Roth earnings at withdrawl once I retire). At this time I am not looking to convert the regular IRA into a Roth IRA.

Knowing the split ... $4000 IRA and $6000 Roth
what the best option for each?

There are investment strategies based on how many years to retirement. These aren't set in stone, but you might look into it. Here's an interesting web page I found with a dynamic calculator. It was a little confusing at first, but then I clicked in "Ideal Allocation" and saw how it worked. If you click in the titles, like "2 year spending", the HELP section explains what that means. Some investment firms set up mutual fund that are already diversived based on your age.

Mutual fund websites also have education sections like this retirement investing guide at Vanguard.
HERE

There's a lot of advice online. It all boils down to YOUR risk aversion level.

Here is a link that might be useful: Asset Allocation

Kudos for saving on a low income. Many people use that an excuse to go into debt.

I think you're on the right track. Instead of putting a lot of energy into buying a really hot stock, making a killing in commodities, or other get rich schemes, you need to focus on keeping costs down and having an appropriate asset allocation. Reading the Vanguard site can help you. You may also want to check your library for other books.

It sounds like you are also doing the other necessary thing - raising your income. The sad truth is that we all need to save enough for our retirement to keep from being poor. A real living wage has to provide enough to live on in the short therm and enough to set aside for retirement. Not saving enough for retirement is almost like another form of debt. You are spending money that you owe your future self.

I'll second the others' recommendations for Vanguard. I'll also second joestrauss' comment that the three funds you mention, although excellent choices, all have the disadvantage of restricting themselves to domestic sources.

I've learned a lot about investing from the website of Paul Merriman, a Seattle-area financial advisor. He is big on international diversification, to the extent that he recommends keeping 50% of your equities in international funds (including emerging markets).

He has lots of detailed portfolio recommendations, though most of them require more than $10,000 in order to meet the minimum-balance requirements of the recommended funds.

One alternative he doesn't mention, but which seems to be in keeping with his philosophy, is Vanguard's Global Equity Fund. This fund is currently holding 45% North America, 28% Europe, 14% Pacific, and 13% emerging markets. It has returned nearly 12%/year over the past decade and more than 15% over the past year.

I would guess that this fund alone might be too international for most people's tastes, but some combination of it and the Total Stock Market Index fund that you mention might be a good choice. Of course, this is only a guess, and you need to make up your own mind. Merriman has lots of useful information, and he knows a lot more about what he's talking about than I do.

Here is a link that might be useful: Paul Merriman's website

I have my SEP account in one of the funds under the American Funds umbrella. They have many different funds to choose from, and many have been around for many decades. There's something for everyone--funds for growth, funds for security, etc.

The fees for the fund I'm in are negligible--my first deposit was in the $4000 range and they charged about $25 initially, and there's a $10 annual charge. But the fund itself pays wonderfully. This year, by my calculations, I've earned about 16% (yes you read that right!) on my investment in this fund--and I chose one of the really safe and secure funds, rather than one of the rapid growth ones.

Why don't you shop around--talk to several representatives from several different funds, and see who's got the best deal for your family, who you like, who you trust. Good luck.

Aren't American Funds all load funds? If so (and their website seems to say it), how can you say that the fees are negligible?

There are plenty of no load mutual funds available that are stellar performers. There are also loaders like World Funds
Third Millenium Russia which are NTF (no transaction fee)
through many of the larger brokerage houses such as TD Ameritrade, Schwab, Scottrade, etc. Go to Morningstar.com and click on funds on the toolbar at the top, then scroll down to top performing mutual funds and find EUROX, UNWPX, PRLAX, etc.
Of course if a 46$ RETURN DOESN'T APPEAL TO YOU, YOU CAN GO BACK TO THE BANK WHERE YOU CAN BET YOUR LOST DOLLARS SOMEONE THERE IS DOING THE EXACT SAME THING WITH YOUR MONEY.

Here's another view...

I'm a skilled seamstress. What I do best is shorten slacks/sleeves, alter waistlines, make draperies, cushions, etc.. I work hard for my living. At the end of a day I'm TIRED. Sitting down with financials or at the computer to "research" the "best" funds (no load, NTF) doesn't figure prominently in my leisure time. I'd rather take the dog for a walk, mow the lawn, or work in the gardens, frankly!

We use a financial planner. We've been with him for over 12 years now and he's been great. He earns his "fee". We are politically aware and active. We are in touch with financial markets/trends and have profitted from it nicely. We meet with him quarterly, and TALK. He knows how we think by now. He knows we are all about building capital. He is savvy about moving money to preserve capital even if it means sacrificing some POTENTIAL gains to guarantee it.

All I'm saying is that there is nothing wrong with paying someone to look after your best interests. Esp. if you don't want to invest your limited FREE time to it! Sure it "costs", but what price do you put on your free time? if you LOVE doing it for yourself, that's one thing... but if it's a struggle for you and adds to your stress... PAY SOMEONE ELSE TO DO IT!

I could do my own taxes alone, too... but paying an accountant to do it for me makes my life easier and eliminates a lot of stress.

Just another thought...

Chelone has a good point: You may well be better off paying someone to manage your investments for you than doing it yourself.

However, there is one possible problem: How can you be sure that the advisor is looking after your interests and not his or her own?

It turns out that there are two kinds of financial advisors: brokers and fiduciaries. A fiduciary is required to put your interests first; a broker is not.

I've included a link to an article with lots more detail.

Here is a link that might be useful: What kind of advisor do you have?

Chelone uses a CFP which is good. I have yet to find one who has a clue, actually cares about my interests and goals, and who won't try to sell me a front or back-load mutual fund which hasn't performed double digit returns in five years "it's all about me" Thank You. No no, I do work for myself as a Gumment contractor and in seven years of investing on my own
now call it wealth management. You can take a middle of the road approach and invest in the indexes such as the S&P. This
approach along with the power of compounding are the basis of many books, 'Armchair Millionaire' comes to mind.

I Love this stuff and read everything worthy of the subject.