The basic rule: almost any investment that exists, as long your brokerage offers it

A Roth IRA is not itself an investment. It is a container—a tax-sheltered account that holds investments. What you put inside depends on what your brokerage allows, but most brokerages let you buy stocks, bonds, mutual funds, exchange-traded funds (ETFs), and certificates of deposit (CDs). Some allow real estate investment trusts (REITs), options, or individual bonds. A few restrict you to mutual funds only.

The IRS does not care what you buy, as long as it is a legitimate security or investment product. What the IRS forbids is holding physical gold bars, collectibles, or life insurance inside a Roth IRA. You also cannot lend money to yourself or buy property you already own. Beyond those limits, the choice is yours.

The real constraint is not what you are allowed to buy—it is how much you can contribute each year. For 2024, you can put up to $7,000 into a Roth IRA if you are under 50, or $8,000 if you are 50 or older. That limit applies to all your IRAs combined, not per account. The money you contribute can then be invested in whatever your brokerage offers.

Key Takeaways

  • Your brokerage decides what investments are available in your Roth IRA, but most offer stocks, mutual funds, ETFs, bonds, and CDs.
  • The IRS forbids physical gold, collectibles, and life insurance inside a Roth IRA, but allows nearly every other security.
  • You can contribute only $7,000 per year (or $8,000 if you are 50 or older), and that limit covers all your IRAs combined.
  • A diversified mix of low-cost index funds or ETFs is a common choice for long-term Roth IRA investors because fees compound over decades.
  • Your choice of what to buy should depend on your age, how much risk you can tolerate, and when you plan to retire.

Why your brokerage matters more than you think

Not every brokerage offers the same investments. Some brokerages—like Fidelity, Vanguard, and Charles Schwab—offer thousands of mutual funds, ETFs, individual stocks, and bonds with little or no trading cost. Others charge per trade or restrict you to their own products. A few online banks offer only CDs and money market funds inside a Roth IRA.

Before you open a Roth IRA, look at what that brokerage actually lets you buy. If you want to own individual stocks, make sure they do not charge a commission per trade. If you want low-cost index funds, check whether they offer Vanguard or Fidelity funds, or their own equivalent. If you are not sure what you want to buy yet, a brokerage with a wide range of options gives you room to change your mind later without switching accounts.

You can also move money from one Roth IRA to another through a process called a trustee-to-trustee transfer. This does not count as a withdrawal, so it does not trigger taxes or penalties. If you open a Roth IRA at a brokerage with limited options and later want more choices, you can move the whole account without losing any of your tax benefits.

Stocks versus funds: the trade-off between control and simplicity

Individual stocks let you own a piece of a specific company. If you buy 10 shares of Apple, you own Apple. Funds—whether mutual funds or ETFs—let you own a slice of many companies at once. A single fund might hold 500 stocks, so one purchase gives you instant diversification.

Individual stocks require you to research companies, decide which ones to buy, and monitor them over time. They also concentrate your money in fewer places, which means one bad pick can hurt more. Funds require less research and spread your risk across many holdings, but you pay a fee to the fund manager (though some funds charge almost nothing).

For a Roth IRA—which is meant to grow for decades—most investors choose funds over individual stocks. The reason is simple: fees compound. A fund that charges 0.03% per year costs almost nothing over 30 years. A fund that charges 1% per year costs far more. Since you cannot withdraw money without penalties until age 59½, you want low fees eating away at your growth for as long as possible.

Index funds and ETFs: the most common choice

An index fund is a mutual fund that tracks a list of stocks—usually a well-known list like the S&P 500 (the 500 largest U.S. companies) or the total U.S. stock market. An exchange-traded fund (ETF) is similar but trades like a stock throughout the day instead of pricing once at the end of each day. For a Roth IRA, the difference between them matters less than the fee.

A low-cost S&P 500 index fund or ETF costs between 0.03% and 0.10% per year. That means on a $10,000 investment, you pay $3 to $10 per year. A target-date fund—which automatically shifts from stocks to bonds as you approach retirement—typically costs 0.10% to 0.20% per year. Both are far cheaper than actively managed funds, which often charge 0.50% to 1.50% per year because a manager is picking stocks for you.

Many people build a simple Roth IRA by buying one or two index funds: perhaps a U.S. stock index fund and an international stock index fund, or a single total-market fund that includes both. This approach requires almost no maintenance and keeps fees low. Others use a target-date fund that does the rebalancing for them automatically.

Bonds and CDs: lower risk, lower growth

A bond is a loan you make to a government or company. In exchange, they pay you interest. A certificate of deposit (CD) is a savings product where you lend money to a bank for a fixed period—usually three months to five years—and the bank pays you a set interest rate. Both are safer than stocks because the payment is promised, not dependent on company profits.

The trade-off is growth. Stocks have historically returned around 10% per year over long periods, though with ups and downs. Bonds and CDs typically return 3% to 6% per year, depending on interest rates and the issuer's credit. For a Roth IRA that you will not touch for 30 years, bonds and CDs alone usually do not grow fast enough to build real wealth.

Most investors use bonds or CDs as a smaller piece of a larger mix. A common approach for someone in their 30s might be 80% stock index funds and 20% bonds. Someone in their 60s might flip that to 40% stocks and 60% bonds. The older you are, the more you typically shift toward bonds and CDs because you have less time to recover from stock market drops.

How to think about risk and your age

Risk means the possibility that your investment will lose value in the short term. Stocks are riskier than bonds because stock prices bounce around. But over 20 or 30 years, stocks have historically recovered from every drop and grown much more than bonds. This is why age matters: if you are 25 and will not touch your Roth IRA for 40 years, you can afford to own mostly stocks because you have time to wait out the bad years. If you are 60 and plan to retire in five years, you cannot afford a big stock market drop, so bonds make more sense.

A simple rule: subtract your age from 110 (or 120 if you are comfortable with more risk). The result is roughly the percentage you might put in stocks. A 30-year-old might own 80% stocks and 20% bonds. A 60-year-old might own 50% stocks and 50% bonds. This is not a law—it is a starting point. If you sleep better at night with less risk, own more bonds. If you can tolerate volatility, own more stocks.

Your Roth IRA is one piece of your overall money. If you have an emergency fund, a stable job, and other savings, you can take more risk in your Roth IRA. If your Roth IRA is your only savings, you might want a more conservative mix.

What you cannot buy, and why

The IRS forbids a few specific things inside a Roth IRA. You cannot buy physical gold bars, silver coins, or other precious metals (though you can own gold through an ETF or mining company stock). You cannot buy collectibles like art, stamps, or rare coins. You cannot buy life insurance. You cannot borrow money from your own IRA or use it as collateral for a loan. You also cannot buy property you already own or rent to yourself.

These rules exist to prevent people from using a Roth IRA as a personal piggy bank or a way to hide assets. The account is meant for retirement, not for storing things or borrowing against. If you break these rules, the IRS can penalize you or even disqualify the entire account, meaning all the tax-free growth disappears.

Getting started: a simple first move

If you are opening a Roth IRA for the first time and are not sure what to buy, a single low-cost target-date fund is a reasonable first step. Pick the fund that matches roughly when you plan to retire (for example, a 2055 target-date fund if you are 25 now). The fund will automatically shift from stocks to bonds as you age. You can always change your mind later and buy something different.

Alternatively, buy a total U.S. stock market index fund and a total international stock market index fund in a 70-30 or 80-20 split. This gives you diversification across the entire world stock market with minimal fees and no maintenance. You can add bonds later if you want to reduce risk.

The most important thing is to start. The difference between investing $7,000 at age 25 versus age 35 is enormous over 40 years, even if you never add another dollar. The second most important thing is to keep fees low. A 0.05% fee versus a 1% fee does not sound like much, but over decades it compounds into tens of thousands of dollars.

Frequently Asked Questions

Can I own individual stocks in a Roth IRA?

Yes, if your brokerage allows it. Most major brokerages let you buy individual stocks commission-free. However, individual stocks require more research and carry more risk than funds because your money is concentrated in fewer companies. For a long-term retirement account, many investors prefer funds for simplicity and diversification.

What if I do not know anything about investing?

A target-date fund or a simple two-fund portfolio (a U.S. stock index fund plus an international stock index fund) requires almost no knowledge. You buy it once and let it sit. The fund manager or the automatic rebalancing does the work for you. This is a perfectly reasonable strategy for someone who does not want to spend time learning about investing.

Should I buy bonds if I am young?

Not necessarily. If you are under 40 and will not touch your Roth IRA for 25+ years, an all-stock portfolio historically performs better. Bonds reduce short-term volatility but also reduce long-term growth. You can add bonds later as you get closer to retirement, or if market swings make you uncomfortable.

Can I change what I own after I buy it?

Yes, completely. You can sell one fund and buy another without any tax consequences or penalties. This is one advantage of a Roth IRA: you can experiment and adjust your strategy over time without worrying about capital gains taxes. Just remember that you cannot contribute more than your annual limit, so selling and buying does not give you extra contribution room.

What happens if I buy something and it loses value?

Your account balance goes down, but you have not lost the tax benefit. When the investment recovers and grows, all that growth is tax-free. This is why a Roth IRA is good for long-term investing: you can ride out the bad years without worrying about taxes on the recovery. If you need the money before age 59½, you will owe taxes and penalties on the earnings, but not on your contributions.