As you continue to invest and grow your retirement account, it is essential to keep an eye on the performance of each investment. While there can be some overlap among different types of investments related to your overall portfolio strategy, it’s still helpful to know what options are possible for IRA assets.
Let’s look at three more options here of investment types and how they can fit into your IRA portfolio.
Stocks are a popular choice for IRA accounts because they provide an opportunity to earn higher returns in the long term. In addition, a stock represents partial ownership of a company. You can purchase them through your broker just like any other investment asset, which means there is no tax penalty when it comes time to withdraw money from retirement accounts.
Of course, there is a tradeoff for the potential higher returns that stocks can provide. Stock prices fluctuate, and it may be difficult to tell whether or not you are making money on your investments over short periods. For this reason, many investors choose to hold onto their stock positions long-term (i.e., more than one year) to benefit from the long-term nature of stock returns.
- Fixed Income
Fixed income investments, such as bonds and money market accounts tend to have lower long-term returns than stocks. However, they are a good choice for IRA portfolios because they can provide stability when the stock market is experiencing turmoil or declines in value. In addition, many fixed-income investments pay monthly distributions, which add cash flow into your portfolio.
When you buy a fixed-income investment, the money stays in your account until it reaches maturity or is sold to another investor. Because of this rule, there are never any tax consequences when selling these types of investments within an IRA – even if they have appreciated significantly during that period.
- Mutual Funds
Mutual funds provide a way for you to pool your money with other investors and have it managed by an expert in the field. This type of investment is appealing because many mutual fund managers employ advanced strategies, such as hedging against downside risk, which can help protect your portfolio from losses during market declines. In addition, each mutual fund generally has its investment philosophy, which can lead to greater diversity than simply holding stocks or bonds.
In conclusion, there are a wide variety of investments that can be used within an IRA account. However, the most important thing to remember is to have a consistent investment strategy and stay the course through market fluctuations to achieve your portfolio’s long-term goals.