Roth IRA Investment Options: What Can You Invest In?

Most Roth IRAs are opened at brokerages that offer a broad investment menu: individual stocks, bonds, ETFs, mutual funds, and CDs. Some providers also offer alternative investments. The best investments for a Roth IRA are those expected to grow significantly over time, since all qualified withdrawals are tax-free — high-growth assets benefit most from the Roth tax shield.

Because Roth IRA withdrawals are tax-free in retirement, assets with high expected growth and high tax drag (like actively managed funds or high-dividend stocks) are good candidates. In a tax-advantaged account, you don't pay taxes on dividends or capital gains along the way, so tax-efficient placement matters less inside a Roth than in a taxable account.

Three common approaches: (1) Broad-market index funds — low-cost ETFs or mutual funds tracking the S&P 500 or total stock market offer diversification and growth potential at minimal cost. (2) Target-date funds — automatically shift toward bonds as you approach retirement, requiring no ongoing management. (3) Individual stocks — higher risk but can maximize the tax-free growth benefit if the stocks appreciate significantly. For most savers, a low-cost index fund or target-date fund is the simplest starting point.

The power of a Roth IRA is that contributions grow tax-free and qualified withdrawals are tax-free. Over decades, compound growth without annual tax drag can make a significant difference. Use our growth calculator to project how contributions might grow over time.