As an alternative to a "one-stop shop" like a target-retirement fund, you can fill your Roth account with index funds or mutual funds of your choice.

An index fund is a cousin of a mutual fund where you own all or almost all of one particular kind of investment. The most popular of all is the "500 index." It holds within it little pieces of the 500 largest companies in the United States.

But there are also tons of other choices. Here are some examples: You can own a mid-size company index; a small company index; an international index; an emerging market index (think Third World countries); a government bond index; a corporate bond index; a real estate index fund and on and on.

If you decide to build your own portfolio, don't bet the farm on any one sector of investing. The younger you are, the more stock oriented you want to be. The older you are, the more bonds you want to have. You can make it ultra simple with just three to five index funds or go crazy with as many as 15.

The core of any index should be the Total Stock Market Index which mimics the total United States stock market. Again, I have some samples for you, but if you want to build an index-oriented Roth, take your time and make sure you are extremely well diversified regardless of age.

If you want to use mutual funds instead of index funds, you will pay a higher annual management fee -- about three to five times more. The fees are stated as a percent of the money you have invested. An index fund should cost as little as .09 percent to .30 percent per year. The average mutual fund costs 1.5 percent per year although you can build a great portfolio at .5 percent to .8 percent. Over time what seems like a tiny difference from fund to fund can make a huge difference in how much money you have to spend in the tens of thousands of dollars. Here are some sample low-cost index funds that I like.

Index Funds

TIAA Equity Index
tiaacref.org
Invests in approximately 3,000 companies
Expense: 0.09%
Mininum investment: $2,000 to open IRA; $ 2,500 for general account (or $50 if you start an Automatic Inv. Plan). If your balance is below $1,500, you will be charged $25, unless you invest at least $100/month in an automatic investment plan.

Vanguard Total Stock Market Index
vanguard.com
Invests in approximately 3,400 companies
Expense: 0.18% (other fees may apply)
Minimum investment: $3,000 minimum to open an IRA; $3,000 minimum to open an investment account

Vanguard Star
vanguard.com
Invests 35% in bonds and 65% in stocks using a basket of Vanguard funds
Expense: 0.37%
Minimum investment: $1,000 minimum to open an IRA; $1,000 minimum to open an investment account

Schwab Total Stock Market Index Fund
schwab.com
Invests in 4,000 companies
Expense: 0.09%
Minimum investment: $100

Schwab International Index Fund
schwab.com
Invests in 350 publicly traded companies from selected countries outside the U.S.
Expense: 0.19%
Minimum investment: $100

Schwab Small-Cap Index Fund
schwab.com
Invests in the second-largest 1,000 publicly traded U.S. companies
Expense: 0.19%
Minimum investment: $100

Fidelity Four-in-One Index Fund
fidelity.com
Invests 48% in 500 largest stocks, 12% in rest of U.S. stock market, 25% in international stock index, 15% in bond index
Expense: 0.23%
Minimum investment: $2500 minimum to open an IRA; $10,000 minimum to open an investment account