Roth IRAs hold the same types of investments as regular brokerage accounts

A Roth IRA is a container for money, not an investment itself. Once you open one, you can buy stocks, bonds, mutual funds, exchange-traded funds (ETFs), and in some cases real estate or alternative investments — the same things you could buy in a regular taxable account. The difference is that growth inside a Roth IRA is tax-free, and withdrawals in retirement are tax-free too.

What you actually invest in depends on your brokerage firm and your own choices. Some brokerages restrict you to their own funds; others let you buy almost anything. Your age, risk tolerance, and timeline until retirement should shape what you pick, not the Roth IRA label itself.

Key Takeaways

  • Stocks, bonds, mutual funds, and ETFs are the most common Roth IRA holdings and are available at nearly every brokerage.
  • Your brokerage firm sets the menu of what you can buy — some offer thousands of options, others limit you to their own products.
  • Target-date funds and low-cost index funds are common starting points because they spread risk across many companies or bonds automatically.
  • You can change what you hold inside your Roth IRA without tax consequences, so starting with something simple and adjusting later is a normal path.
  • Certain investments like collectibles and life insurance are banned from Roth IRAs by federal law, regardless of which brokerage you use.

Stocks and stock mutual funds for growth-focused investors

Individual stocks let you own a piece of a single company. You buy shares, and the value rises or falls based on how the company performs. Many people hold a mix of individual stocks and funds rather than one or the other. Individual stocks require more research and monitoring, but they also let you concentrate on companies you believe in.

Stock mutual funds and stock ETFs bundle dozens or hundreds of stocks into one holding. A fund might track the S&P 500 (the 500 largest U.S. companies), focus on technology companies, or hold small-cap stocks. The fund manager or an automated system rebalances the holdings, so you do not have to pick individual stocks yourself. This is why many people new to investing start with a broad stock fund rather than picking 20 individual companies.

Bonds and bond funds for stability and income

Bonds are loans you make to governments or companies. You lend money, they pay you interest, and at a set date they return your principal. Bond prices move in the opposite direction of interest rates — when rates rise, existing bonds become less attractive and their prices fall. When rates fall, bond prices rise.

Most people do not buy individual bonds inside a Roth IRA; instead they hold bond mutual funds or bond ETFs. A bond fund holds dozens of bonds with different maturity dates and issuers, so if one issuer defaults, your entire holding is not wiped out. Bond funds are less volatile than stock funds but also grow more slowly over time. Many investors hold a mix of both — for example, 70 percent stocks and 30 percent bonds — to balance growth with stability.

Target-date funds that adjust automatically as you age

A target-date fund is a single fund that holds a mix of stocks and bonds, and the mix shifts automatically over time. If you choose a 2055 target-date fund and you are 35 years old now, the fund starts aggressive — mostly stocks — because you have 30 years until retirement. As 2055 approaches, the fund gradually moves money from stocks into bonds, becoming more conservative. By 2055, it holds mostly bonds and stable investments.

Target-date funds are popular inside Roth IRAs because they require almost no maintenance. You pick the fund once and it rebalances itself. The downside is that you have less control over the exact mix, and different fund families use different glide paths — meaning a 2055 fund at one company might be more aggressive than a 2055 fund at another. Read the fund's description before you buy to see what the mix looks like today and how it will change.

Index funds and ETFs that track market benchmarks

An index fund is a mutual fund or ETF designed to match the performance of a market index — a fixed list of companies or bonds. The S&P 500 index fund holds the same 500 companies as the S&P 500, in roughly the same proportions. Because the fund simply copies the index rather than paying a manager to pick stocks, index funds charge very low fees — often 0.03 to 0.20 percent per year.

ETFs are similar to mutual funds but trade like stocks during market hours. You can buy or sell an ETF any time the market is open, whereas mutual funds settle at the end of the day. For most Roth IRA holders, this difference does not matter much because you are not trading frequently. Both index mutual funds and index ETFs are low-cost ways to own a broad slice of the market without picking individual stocks.

What you cannot hold in a Roth IRA

Federal law prohibits certain investments inside any IRA, including Roth IRAs. You cannot hold collectibles — art, coins, stamps, or memorabilia — even if you think they will appreciate. You cannot hold life insurance policies. You cannot hold most cryptocurrency, though some brokerages are beginning to offer limited crypto options within IRAs.

You also cannot hold investments that create a conflict of interest. For example, you cannot use your Roth IRA to buy real estate that you personally live in or use, and you cannot lend money from your Roth IRA to yourself or a family member. These rules exist to prevent people from using IRAs as personal piggy banks rather than retirement savings vehicles.

How to choose what to hold based on your situation

If you are in your 20s or 30s and do not need the money for decades, a portfolio of mostly stocks or a target-date fund makes sense because you have time to recover from market downturns. If you are within 10 years of retirement, holding more bonds reduces the risk that a market crash will wipe out money you will soon need.

If you do not want to think about investing, a single target-date fund or a simple three-fund portfolio (one U.S. stock fund, one international stock fund, one bond fund) requires minimal maintenance. If you enjoy research and want to pick individual stocks, that is also a valid approach — just make sure you understand what you are buying and do not put all your money into one company.

You can change what you hold inside your Roth IRA without any tax consequences or penalties. If you start with a target-date fund and later decide you want more control, you can sell the fund and buy individual stocks or a different mix of funds. This flexibility means you do not have to get it perfect on day one.

Frequently Asked Questions

Can I hold real estate inside a Roth IRA?

You can hold real estate investment trusts (REITs), which are companies that own and manage real estate. You cannot hold physical property directly — a house, land, or rental property — inside a Roth IRA. Some specialized IRAs called self-directed IRAs allow real estate, but they have strict rules and higher fees.

What happens if I buy something that is not allowed in a Roth IRA?

If you hold a prohibited investment, the IRS can treat the entire Roth IRA as disqualified, meaning you lose the tax benefits and owe taxes on the growth. Your brokerage firm should prevent you from buying prohibited investments in the first place, but it is your responsibility to know the rules.

Should I pick individual stocks or funds?

Funds are simpler and require less research. Individual stocks give you more control but demand more time and knowledge. Many investors hold both — a core of low-cost index funds plus a smaller portion in individual stocks they research. There is no single right answer.

Can I move money between different investments inside my Roth IRA without paying taxes?

Yes. Selling one fund and buying another inside your Roth IRA has no tax consequences. You can rebalance, switch strategies, or change your mind as often as you want without triggering capital gains tax.

What if I do not know what to invest in?

Start with a single target-date fund that matches your expected retirement year, or a simple index fund like an S&P 500 fund. You can always adjust later. Many people begin with something basic and learn more over time rather than trying to build the perfect portfolio immediately.