Low-risk investments often found in IRAs include CDs, government bonds, US and US savings bonds, and money market funds. Mutual funds in particular are a popular choice for IRAs because of the diversification they offer. The market for government bonds, bonds and bonds is larger and more liquid than any other.
That means you won’t have any problems selling government bonds if you need to make a payout before they reach their full maturity date. Money market mutual funds are highly liquid, extremely secure investment funds that are a popular choice for short-term cash management needs. They hold short-term bonds with high credit ratings, such as Treasury bills, commercial papers, and certificates of deposit (CDs). Money market investment funds are characterized by low costs and very high liquidity, but they also offer lower returns than most other types of investment funds.
When market experts talk about turning parts of their portfolios “into cash, they usually mean investing it in money market mutual funds. Government bonds, money market investment funds, and high-yield savings accounts are considered by most experts to be the safest investment types available. Investment-grade corporate bonds are fixed-income securities sold by companies to finance their operations. This wide range makes the IRA both Roth and traditional IRAs an attractive option for your retirement savings, particularly if you’ve maxed out 401 (k) matching dollars.
If companies get into trouble, they could expect credit ratings downgrades, meaning their bonds may no longer be considered investment grade. You don’t have to diversify between target-date funds; instead, invest all of your IRA money in the only fund. Money market funds are pools of CDs, short-term bonds, and other low-risk investments that are grouped together to spread risk and are generally sold by brokerage firms and investment fund companies. You might be tempted to fill your IRA with individual stocks and bonds, but this is rarely the best approach for anyone other than a professional investor.
One of the best things about an IRA compared to, for example, a company retirement plan like a 401 (k) is the much wider range of investment options available in the account. These funds are very popular in 401 (k), s and tend to have higher expense ratios, but through an IRA, you can buy a wider selection to find a low-cost option. To use a robo-advisor, you’d need to open an IRA account with one of these companies, such as Betterment or Wealthfront.
