When constructing a portfolio for your Roth IRA—a type of tax-advantaged individual retirement account—you have a variety of investment options to choose from.
Just like traditional IRAs, Roth IRAs can grow tax-free. However, unlike traditional IRAs, contributions to Roth IRAs are not tax-deductible. Still, you can withdraw contributions tax- and penalty-free from a Roth IRA at any time. You can withdraw earnings without paying taxes or penalties as long as you abide by the Roth IRA withdrawal rules: you must have been contributing to that–or some other–Roth IRA for more than five years. And you must have reached at least age 59 ½ or qualified for an exemption, such as an IRS-recognized disability.
If you’re building a Roth IRA to save for retirement, you’ll want to design a portfolio using a long-term, buy-and-hold approach. A strong portfolio will be diversified across different asset classes, such as stocks and…
