Which ETFs Are Best For a Roth IRA?

Which ETFs are best for a Roth IRA

Investments such as stocks, bonds and cash can help you build up a healthy retirement nest egg; however, successful investing requires patience and dedication.

Online brokers like E*TRADE or TD Ameritrade make it possible to buy and sell individual securities at competitive prices, while exchange-traded funds (ETFs), which track market indexes with minimal fees and provide diversified exposure, may provide access to individual investments at attractive rates.

Value Stock Funds

Stocks are one of the top investments for an IRA, as they’re simple and straightforward to invest in, providing long-term growth potential through dividend payments that may even be tax-free in a Roth account.

Many investors favor mutual funds or exchange-traded funds (ETFs) over individual stocks because these funds are managed by professional money managers and provide a diversified portfolio that fits with your overall investment strategy.

Investors looking for value funds can select ones specializing in U.S. large-cap companies as well as foreign small and mid-cap firms, some with an emphasis on dividend-paying stocks while others don’t place this emphasis.

To help select value funds that best meet the needs of your IRA, speak to a financial advisor. SmartAsset’s free tool connects you with up to three vetted advisors in your area that offer complimentary interviews so that you can select your perfect partner. Launch your search now!

Bond Funds

Bond funds offer long-term investors steady income. An IRA is the perfect place for bond investments since investors can defer paying taxes until it comes time to withdraw funds at retirement and start withdrawing them tax-free.

Bond fund companies pool money from investors to invest in fixed-income securities such as bonds. They specialize in managing these investments to generate interest payments while upholding or growing principal value, offering investors multiple categories of bonds depending on their risk tolerance and needs – for instance government bonds, asset-backed or mortgage-backed securities, investment grade or high yield debt are some of the options they can select from.

ETFs and mutual funds that fall under the domestic taxable bond Morningstar category provide investors with broad exposure to all these investments, including Treasury inflation-protected securities (TIPS), which are adjusted annually to account for inflation. High-yield bond funds (sometimes known as junk bonds) tend to offer riskier but higher return investments compared to their government and investment-grade counterparts.

Peer-to-Peer Lending

Peer-to-peer lending (P2P lending) is an innovative form of personal loaning that does not go through banks or credit unions, instead pairing borrowers directly with lenders who set rates and terms via websites such as Prosper, Lending Club, Upstart or StreetShares.

Borrowers fill out an online application and provide information such as their income, tax returns and government identification documents. An interest rate based on creditworthiness will then be provided; any missed payments are reported back to credit bureaus and could result in collections action being taken against them.

Investors can expect to generate competitive returns with loan investments through platforms like StreetShares and Peerform, but must accept that not all loans may be repaid. To mitigate this risk, platforms like StreetShares and Peerform use thorough vetting processes to identify risky borrowers while spreading investments across a broad portfolio to minimize exposure.


Robo-advisors allow investors to enjoy hands-free investing. Robo-advisors typically charge low costs; typically either a flat monthly fee or percentage of assets managed; some may even waive fees altogether.

Select a robo-advisor with an investment minimum that suits your needs, and browse its range of investments – such as mutual funds versus cryptocurrency or bonds. Also make sure that it has registered with either the Securities and Exchange Commission (SEC) or your state securities regulator (SSR).

A good robo-advisor should disclose all fees. Ally Invest, for instance, charges transaction fees when purchasing stocks and ETFs but waives them for 90 days when opening an account. When considering any robo-advisor you should also examine its management fee and expense ratio (measured as a percentage of total assets); additionally take note of any transfer or closure fees that might arise.

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