What is the Safest IRA Investment?
An IRA portfolio with proper diversification can help you manage stock market fluctuations and secure greater long-term returns. Mutual and exchange-traded funds are popular diversification solutions.
Be mindful that IRA fees can quickly eat away at your investment gains over time, so opt for low-cost custodians and investment services in order to limit them.
Treasury Securities
Treasury securities offer the safest investment option for an IRA. Backed by the full faith and credit of the federal government, these investments ensure investors will receive timely interest and principal payments.
Treasury Inflation Protected Securities (TIPS). The New York Fed holds auctions to sell these marketable securities that can be purchased by individuals, investment funds, corporations, institutions, estates and trusts.
Investors with Individual Retirement Accounts (IRAs) have the option of buying individual bonds directly, though most investors find it more practical to purchase ETFs and mutual funds that offer more diverse holdings than individual bonds. The best online brokers for IRAs provide access to an array of low-cost funds at reasonable fees while some even provide commission-free trades; Merrill Edge provides access to human financial advisors at local branches of Bank of America for a flat fee.
Bonds
Bonds issued by corporations, municipalities and government agencies offer steady income and diversification benefits for IRA portfolios; however, as with all investments they involve the risk of price fluctuation and possible loss.
Bonds usually offer higher interest rates than savings accounts or certificates of deposit and may be FDIC-insured, while also typically having lower risk than stocks due to less volatile returns.
Firstrade and Robinhood provide easy solutions for self-directed IRA investors looking to self-manage their investments, with competitive trading platforms and an expansive research offering for active traders compared to basic platforms that don’t charge transaction fees on stocks or ETF trades.
Financial advisors offer customized guidance, and working with one can be an excellent way of developing an investment strategy tailored specifically to risk tolerance, retirement goals and taxes. Firms such as Ellevest and Betterment use innovative investing technology combined with human guidance to deliver tailored recommendations.
Working with a Financial Advisor
If your IRA exceeds $100,000 and you would like expert guidance, consider engaging a financial adviser. Before hiring one, ask about fees and whether she acts in your best interests as a fiduciary; make sure that everything she suggests makes sense before signing any paperwork without first reading through and understanding it first. Furthermore, insist that all correspondence and electronic files pertaining to your account go directly to yourself instead of simply going through her.
When it comes to selecting investments, find a broker with no trading commissions and an extensive selection of no-transaction-fee ETFs and mutual funds. Firstrade provides traditional, Roth and SEP IRA accounts with low ETF/mutual fund fees as well as no trading commissions for your convenience.
Asset Allocation
A diversified portfolio is the safest way to invest your IRA money, reducing overall risk while still allowing it to grow over time by spreading winners and losers out evenly during periods of volatility.
Investment in debt securities issued by the government, commonly referred to as Treasuries, can help diversify and provide steady streams of income in an IRA portfolio. However, be wary when buying short-term bills or notes since these may lose value over time.
Stocks are an integral component of most IRA portfolios, making the selection of appropriate stocks an important decision. Take your financial goals and risk tolerance into consideration to select an appropriate mix of large-cap, mid-cap and small-cap shares; diversifying across sectors and market capitalization will reduce single company exposure.
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