A Roth IRA is one of the best possible ways to invest for retirement, and in fact, many experts think it’s the single best retirement account to have. That’s because a Roth IRA allows you to grow your money tax-free for decades and then withdraw it without paying taxes in retirement, too. You can build up a nest egg that the government will never be able to touch again.
Naturally, it makes sense to take full advantage of this account by maxing out your annual contributions. But what are the best investments for your Roth IRA? You’ll want to focus on investments that have a strong likelihood of growing a lot over the long term, but with little chance of going down. That means steering clear of highly speculative investments.
Here are some top investments for your Roth IRA and why they may work for you.
7 top Roth IRA investments for your retirement
S&P 500 index funds
One of the best places to begin investing your Roth IRA is with a fund based on the Standard & Poor’s 500 Index. It’s a collection of hundreds of America’s top companies, including many of the names you know and use every day (Amazon, Apple and Microsoft, for example).
Over time the index has performed well, with average annual returns of about 10 percent. With this index fund, you’ll enjoy a broadly diversified portfolio that includes some of the world’s strongest companies, meaning you’ll have reduced risk and the potential for solid gains. It also doesn’t hurt that these funds often come with low expense ratios, meaning you won’t pay a lot.
Dividend stock funds
Dividend stock funds are another popular option. Companies that pay dividends tend to be in mature industries and generate a ton of cash, allowing them to distribute the money to shareholders. The best companies increase their payouts annually for decades, turning your investment into a dividend dynamo. Plus, they tend to be less volatile than an average fund.
Dividend stock funds can be particularly attractive in a Roth IRA because of their relative safety (they’re in a mature industry) and the fact that the dividends are not subject to tax. Investors can roll dividends right back into the dividend fund and keep the payouts growing year after year.
Value stock funds
Value stock funds include stocks that are more value-priced than the rest of the market, helping you find the stocks that are relative bargains. That means value stocks tend to be less volatile than the rest of the market, and they tend to have good returns over time. Plus, many …….
Source: https://www.bankrate.com/retirement/best-roth-ira-investments/