Roth individual retirement account (Roth IRA) assets require a long-term buy-and-hold strategy, yet investors seek to maximize returns while simultaneously keeping costs low.
Investors should look for core index funds with low costs that provide significant diversification. Furthermore, such investments should provide substantial income that can be tax-free when held within a Roth IRA.
1. Vanguard Total Stock Market ETF (VOO)
Vanguard is known for offering low-cost funds, with the VOO fund standing out as being among the lowest expense ratios of stock index funds.
The fund follows the CRSP US Total Stock Market Index and therefore holds almost all publicly traded stocks within the United States – from large-, mid- and small-cap companies.
Roth IRA investments should have an array of diversified funds as their foundation, so that they may serve as an excellent means for creating an overall portfolio or targeting specific sectors or regions.
Vanguard provides both an ETF (VOO) and mutual fund (VTSAX), with the former ideal for Roth IRAs as it can be purchased through most brokerages without incurring commission charges; while its mutual fund alternative may be better suited if your employer provides retirement plans that don’t allow ETF investments.
2. Fidelity Total Bond ETF (FBND)
Bond markets don’t attract as much media coverage, yet still represent an integral piece of global finance. Bonds provide income while also diversifying a portfolio and helping reduce overall portfolio risk.
Fidelity’s ETF, FBND, offers Roth investors access to bond market investments across investment-grade bonds, Treasury securities and corporate bonds as well as foreign bonds – providing you with exposure across a wide variety of fixed income assets.
One of the main selling points of this fund is its exceptionally low expense ratio of just 0.38% – this makes a tremendous impact when considering that many rival ETFs charge as little as 0.03% for passive strategies.
3. iShares Core Total USD Bond Market ETF (IUSB)
This ETF offers exposure to U.S. dollar-denominated bonds with an emphasis on investment-grade and high yield securities, using market value weighting approach and managed by BlackRock who has awarded this fund with their Gold Medalist rating, meaning 100% analyst coverage as of 2024.
IUSB takes a more broad-based approach than Vanguard’s total bond market ETF by including bonds with below investment-grade credit ratings and those issued in emerging markets, but still sticks with its primary strategy of offering an intermediate duration and moderate risk profile.
As with other ETFs on this list, this ETF provides an ideal option for investors looking to bolster the bond portion of their portfolio and is particularly suitable for tax-advantaged retirement accounts. Just ensure you follow asset placement rules to keep foreign bond funds out of taxable accounts; instead they should belong solely in tax-advantaged retirement accounts and domestic bond funds in taxable ones.
4. iShares Core Total REIT ETF (SCHH)
The iShares Core Total REIT ETF (SCHH) provides investors looking to diversify their portfolio with real estate an affordable way. At $610 million, this fund offers cost-effective exposure to domestic real estate markets while being geographically and class diversified. Rated A in our POWR Ratings of Process, People, and Peers it also features one of the lowest fees among REIT ETFs.
Real estate can be an excellent long-term investment that provides steady income. Investors should focus on large REIT funds with low expenses ratios that provide access to domestic market leaders who pay attractive dividends; such ETFs will fit nicely into Roth IRAs.
