Your IRA investments should reflect your time horizon, goals and risk tolerance while considering ways to minimize fees.
Providers of Individual Retirement Accounts (IRAs) offer an array of investment choices. Some provide access to an extensive array of funds while others specialize in niche investments or offer lower fees.
Target-date funds work towards your retirement date while automatically rebalancing to reduce risk, possibly offering quarterly dividends as an added perk.
Treasury Securities
Treasury securities, which are backed by the full faith and credit of the U.S. government, provide investors with unparalleled principal protection on the market. Individuals, institutions, estates, trusts and corporations regularly use Treasuries to meet a variety of investment objectives.
Treasury securities include bills, notes, and bonds – often offering lower returns than stocks – but can provide an important hedge against portfolio risk while offering steady streams of income.
The federal government offers Treasury Inflation-Protected Securities (TIPS), issued for terms of five, 10 or 30 years and offering semiannual interest payments based on an inflation adjusted principal balance. Like Treasuries, TIPS are tax exempt.
Bonds
Bonds are assets that offer steady stream of income in exchange for their principal, making them an essential component of an IRA portfolio. Not only can bonds diversify and provide tax-deferred income streams, they can also reduce overall portfolio risk – making bonds particularly appealing for investors with lower risk tolerance or nearing retirement.
Higher-performing investments like stocks may bring greater returns over time but are associated with greater risks than safer assets such as CDs or bonds. Many investors choose an asset allocation mix as part of their investing strategy.
Individual retirement accounts (IRAs) provide you with flexibility in selecting investments for retirement; an IRA or Simplified Employee Pension plan (SEP). Other IRAs such as those offered by brokerage firms or robo-advisors offer pre-selected portfolios tailored to meet your goals and risk tolerance, with low fees so as to help maximize returns from investment returns.
Stocks
Growth-minded investors will likely find that stocks provide the safest IRA investment options. This may include both ETFs and mutual funds with growth stocks as well as shares from companies with quarterly dividends.
Investors must recognize that growth stocks can become stagnant or even volatile over time, increasing risk. To lower this risk, many experts advise investing in growth stock ETFs or funds which seek to diversify across hundreds of publicly traded firms.
Individual stocks offer you more control of your IRA portfolio, but they carry greater risk. A single company may file for bankruptcy and render your shares worthless; as market fluctuations shift the asset allocation away from target levels. It’s therefore vitally important that you rebalance regularly.
Money Markets
If safety, stability and liquidity are top priorities when it comes to retirement savings, money market IRAs may be ideal. These funds typically invest in low-risk assets like commercial paper and Treasury bills but may not deliver as high returns compared to other investment options and may be vulnerable to credit risk and interest rate changes.
Money market IRAs typically provide higher yields than traditional savings accounts and can be easily accessed without incurring significant withdrawal penalties, making them ideal for short-term expenses or emergency savings. But be wary of high fees; over time they could eat into your investments over time and reduce returns over time. That is why Betterment may be worth looking at: this robo-advisor manages retirement portfolios at one low fee with features such as tax loss harvesting and automatic rebalancing capabilities – our list of the best IRA accounts may help find something suitable.
