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Nerdy takeaways

The best investments for your Roth IRA depend on your risk tolerance, time until retirement and goals.
Some assets are good options for the Roth IRA because of the way the IRS taxes investment income.
Stocks or ETFs that pay generous dividends could be a good candidate for your Roth IRA.

Because a Roth IRA has unique tax advantages, investing the money in your account can benefit from a bit of strategy. The less tax-efficient an investment is, the bigger the benefit of holding it in a Roth IRA instead of a taxable brokerage account or even a traditional IRA.

Stocks, bonds and mutual funds are all Roth IRA investment options you can have in your account. To make the most of your investment, here's how to choose investments for your Roth IRA.

🤓 Nerdy Tip

Looking for a Roth IRA account instead? Check out our list of the best Roth IRA accounts. You'll need to open and fund one before you begin investing.

How should you invest an Roth IRA?

That's up to you and your investment goals, but in general, consider holding in a Roth any investments that bring:

High growth potential, such as individual stocks that could dramatically rise in value.
Generous dividends, including real estate investment trusts (often called REITs) or other investments that pay regular streams of income.
High levels of turnover, such as actively managed mutual funds.
Frequent trading events, where investor activity triggers taxable events.

What are the best assets for a Roth IRA?

The best assets for a Roth IRA are investments with high total return prospects, particularly over a long period of time. Slow-growing investments, such as money market funds or certificates of deposit, might not pay off since the low returns probably wouldn't cause a huge tax burden down the road. Investments that pay dividends are also a good fit (provided you reinvest them) since dividends can boost returns over time, and those reinvested dividends don't count toward your contribution limit.

Considering this, some of the best investments for a Roth IRA might include:

Small-cap stocks and ETFs.
International stocks (particularly emerging market companies or funds that focus on holding these types of companies).
High-dividend stocks.
High-dividend ETFs.

However, while the above investments could mean maximizing untaxed growth, they also come with considerable risk; high-growth stocks tend to be unproven companies with volatile stock prices. Similarly, a high-dividend stock doesn't necessarily mean its dividend is reliable, so it may not be a suitable choice for long-term retirement investing.

Highly diversified equity funds (a fancy way of saying index funds and ETFs that contain hundreds or even thousands of stocks) may be a solid middle ground. Their long-term growth potential is higher than CDs or money market funds, but they're generally less volatile than individual stocks.

One of the most popular ways to achieve this is to use an S&P 500 ETF, which aims to track the performance of the S&P 500 index. Considering these ETFs' returns should mirror the S&P 500, it's each fund's expense ratio that may be the biggest differentiator. You can see these in the table below.

Best ETFs for a Roth IRA

In addition to investing in an ETF that tracks the S&P 500, you can also invest in ETFs that track some of the asset options that we listed above, such as small-cap stocks, REITs, and high-dividend ETFs, to further diversify your Roth IRA and maximize its tax benefits. Below is a list of top-performing and popular ETFs across different categories.

Small-cap ETFs

Ticker	Company	Performance (Year)
SGDJ	Sprott Junior Gold Miners ETF	126.44%
SILJ	Amplify Junior Silver Miners ETF	56.52%
ECNS	iShares MSCI China Small-Cap ETF	36.30%
AVDV	Avantis International Small Cap Value ETF	36.09%
BRF	VanEck Brazil Small-Cap ETF	34.47%
DISV	Dimensional International Small Cap Value ETF	28.21%
FDTS	First Trust Developed Markets ex-US Small Cap AlphaDEX Fund	120.28%
Source: Finviz. Data is current as of December 3, 2025, and is intended for informational purposes only.

Emerging Market ETFs

Ticker	Company	Performance (Year)
FLKR	Franklin FTSE South Korea ETF	64.57%
EWY	iShares MSCI South Korea ETF	62.89%
COLO	Global X MSCI Colombia ETF	58.62%
EMEQ	Macquarie Focused Emerging Markets Equity ETF	55.74%
AFK	MVIS GDP Africa Index	54.87%
EPU	iShares MSCI Peru and Global Exposure ETF	53.70%
ECH	iShares MSCI Chile ETF	52.00%
EPOL	iShares MSCI Poland ETF	51.77%
KEMQ	KraneShares Emerging Markets Consumer Technology Index ETF	49.49%
Source: Finviz. Data is current as of 2025-12-04 and is intended for informational purposes only.

High-dividend ETFs

The best high-dividend ETF is Invesco KBW Premium Yield Equity REIT ETF (KBWY), which currently has a dividend yield of 9.68%. This is based on our screen of U.S. equity ETFs, which excludes inverse, leveraged and actively managed ETFs and any with expense ratios over 0.5%.
Ticker	Company	Dividend Yield
KBWY	Invesco KBW Premium Yield Equity REIT ETF	9.68%
DIV	Global X SuperDividend U.S. ETF	6.59%
XSHD	Invesco S&P SmallCap High Dividend Low Volatility ETF	6.48%
NUDV	Nuveen ESG Dividend ETF	5.28%
SPYD	SPDR Portfolio S&P 500 High Dividend ETF	4.44%
Source: Finviz. ETF data is current as of Dec. 15, 2025, and is intended for informational purposes only.

REIT ETFs

The best-performing REIT stock by one-year return is DHC (Diversified Healthcare Trust), which is up 96.40%.
Ticker	Company	Performance (Year)
DHC	Diversified Healthcare Trust	96.40%
AHR	American Healthcare REIT Inc	68.15%
ILPT	Industrial Logistics Properties Trust	56.63%
WELL	Welltower Inc	48.71%
PGRE	Paramount Group Inc	35.04%
STRW	Strawberry Fields Reit Inc	34.50%
Source: Finviz. Data is current as of December 16, 2025, and is for informational purposes only.

When do you get taxed?

With both traditional and Roth IRAs, investment growth is generally not taxed as long as the money remains in the account. It’s when investors start taking distributions from their portfolios in retirement that the differences in tax treatment become clear.

Traditional IRA: Withdrawals are taxed at the account holder’s income tax rate. At that point, you’ll owe taxes on both the earnings (which have grown tax-deferred) and your original contributions (which you may have gotten a tax pass on if you funded the account and deducted those contributions from your income taxes).
Roth IRA: The opposite of the above is true for the Roth IRA. Withdrawals of both contributions and earnings (which have grown tax-free) from a Roth IRA are typically not taxed as long as you've held the account for five years and are at least 59½. You settled your tax tab at the beginning by funding the account with money the IRS already taxed.

» Learn more about making a Roth IRA withdrawal

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What else should you consider?

On top of taxes owed on withdrawals, there are other factors to keep in mind when picking your Roth IRA investments:

Tax characteristics. If an investment generates interest income that's already exempt from taxes, it doesn't need the tax benefit offered by a Roth account. For example, dividends paid on municipal bonds are already exempt from federal taxes.

Dividends paid out by REITs, on the other hand, are not sheltered from the IRS’ reach. And because REITs are known for generous dividends, the Roth is an ideal home for this type of investment.

Frequency of trading activity and investments in the account. In a regular, taxable brokerage account, investors who trade in and out of positions frequently expose themselves to short-term capital gains taxes. Short-term capital gains, which are profits on investments held for one year or less, are taxed at a higher rate than long-term capital gains.

For active traders, a Roth IRA is ideal: The IRS doesn’t even require you to report capital gains taxes each year. And, of course, qualified distributions in retirement are tax-free .

For the same reason, actively managed mutual funds with high turnover rates are well-suited to the Roth’s tax protections. (Side note: Passively managed funds — index mutual funds and ETFs, for example — have less internal buying and selling.)

Your timeline. If you're deciding whether to hold an investment in a Roth, traditional or taxable account, always consider how long you can let the investment sit and when you might need the money. The longer you can let an investment ride, the higher the potential returns and number of tax dollars saved by avoiding an IRS bill when you eventually withdraw the money.

Article sources

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1. IRS. Roth IRAs. Accessed May 29, 2025.