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Step 1
Work with the professional who is setting up your IRA account to determine your best plan of action. There is no substitute for expert advice, so ask about recent market trends, what other customers your age and income bracket are doing, how much you should be investing and what risks are involved with each type of investment.
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Step 2
Select a variety of different investment types that will diversify your portfolio. Diversification is the financial equivalent of not putting all your eggs in one basket. If one of your stocks fails, you will not lose all your money if you have other assets as well, such as money market investments, gold and bonds.
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Step 3
Put precious metals into your IRA as a good way to diversify your holdings. Gold, silver and platinum are IRS-approved for IRAs. When stock prices drop, the value of precious metals tends to rise. Having both types of investments in your portfolio can easily achieve ideal diversification.
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Step 4
Invest in certificates of deposit (CDs) for a conservative approach with your IRA. A CD earns a comparatively high interest rate on your IRA contributions, yet involves very little risk.
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Step 5
Consider money market funds as you get older. The interest rate is lower than that of a CD, but unlike a CD, there is no specified term of the deposit. If you need to access the money earlier than expected, the only penalty you will face is the IRS early distribution penalty.
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Step 6
Choose mutual funds as another conservative way to diversify your IRA account. Your money is combined with that of other investors. The larger sum is used to buy stocks from more than one company.
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Step 7
Play the stock market and invest in stocks and bonds. This is an aggressive, riskier approach often taken by young IRA owners. There is more potential for a large return on stocks than with CDs or money market funds.
