The Best IRA Funds
Opening an individual retirement account, or IRA, is one of the best ways to save for a comfortable retirement. But the IRA itself is simply a shell. What you fill that shell with can have a profound impact on the performance of your IRA over the years. Matching the funds within your IRA to your own investment goals, and using those funds to keep costs down, are two of the best ways to grow your wealth for retirement.
Other People Are Reading
-
Index Funds
-
Index funds can be an excellent choice for the core of your IRA portfolio. One of the main advantages of using an index fund is that doing so trims your costs to the absolute minimum, while guaranteeing that your own IRA account will perform as well as the underlying index. Since the majority of managed mutual funds fail to beat the market averages over the long-term, this low-cost index fund is attractive.
Aggressive Growth Funds
-
If you find a high-quality aggressive growth fund you want to invest in, putting that fund in your IRA instead of a taxable account makes a lot of sense. Aggressive growth funds tend to do a lot of trading, and that in turn can generate high levels of capital gains. If you hold the fund in a taxable account, you must pay taxes on those capital gains each year. But if you hold the funds within an IRA, the money can grow tax-deferred.
-
International Funds
-
Putting some of your money overseas helps protect you from downturns in the U.S. market, while also giving you additional levels of diversification. An IRA is a good vehicle for international investing, since the tax-deferred nature of the account means you do not have to pay taxes on any gains along the way. It is important to look at the performance of any international funds under consideration, and to compare that performance to the benchmark indexes for the funds.
Target Date Funds
-
If you prefer to let the fund manager handle your asset allocation, putting a target date fund in your IRA can make a lot of sense. Many 401k investors already use these funds, which allocate their money between stocks, bonds and fixed income investments based on factors like number of years to retirement. It is important to check the costs of these funds carefully, since some of them can be expensive. But if you prefer a hands-off approach to your IRA, a target date fund can be a smart choice.
-
