IRS-Approved Investments for Roth IRAs

You can invest your Roth IRA funds in gold coins if you wish.

When you invest in a Roth IRA, you can build a nest egg that allows you to have tax-free income when you retire. One other advantages of a Roth IRA is that it allows you to invest in a wide variety of asset classes, including target date retirement funds, individual stocks and even gold and silver coins.

Index Mutual Funds

Index mutual funds sometimes are the basis of a Roth IRA, because they have lower costs than other types of funds. Index funds do not attempt to time market fluctuations, and they do not pick and choose stocks. Instead, these funds simply purchase all the stocks in a given index, guaranteeing that you will do as well as the market as a whole.

Target Date Retirement Funds

Target date retirement funds automatically rebalance their mix of stocks, bonds and fixed-income investments as you get closer to retirement. You simply choose the fund that corresponds to the year you plan to retire. As you get closer to retirement, the fund reduces its exposure to the stock market and increases the amount invested in fixed-income securities and bonds.

Precious Metals

According to IRS Publication 590, you can invest your Roth IRA funds in precious metals in the form of gold, silver and platinum coins. You can invest in one-ounce, half-ounce, quarter-ounce or one-tenth-ounce U.S. gold coins. You also can invest your Roth IRA in one-ounce silver coins, as long as those coins are minted by the U.S. Treasury Department.

Individual Stocks

If you prefer, you can invest your Roth IRA funds in individual stocks. You can open a Roth IRA account with a broker and use that account to buy and sell individual stocks over time. Buying and selling stocks within a Roth IRA has its advantages, because you do not have to pay capital gains on the stocks you sell.

Exchange Traded Fudns

Exchange traded funds (ETFs) combine the benefits of individual stocks with the benefits of mutual funds. Like mutual funds, ETFs invest in a diversified basket of stocks, bonds or other investments. But unlike mutual funds, which are priced only at the end of each trading day, ETFs trade throughout the day, allowing you to get in and out at a specific price.

References

• CNN Money: The Beauty of Index Funds
• IRS Publication 590: IRAs