To buy ETFs, you'll need to open your Roth IRA with a brokerage firm. In some cases, if a mutual fund company also has its own ETFs, you can access them in a Roth IRA. Additionally, many brokerage firms offer Silver and Gold IRAs, which allow you to invest in precious metals. However, fund companies that offer this option will usually ask you to technically open a brokerage account to hold ETF shares.
Mutual funds are bought and sold at their net asset value (NAV), which is calculated at the end of the day. You can buy and sell stocks at any time of the day at the current price, which changes very quickly. You can buy one share of an ETF or millions, but they must be full stocks. Mutual funds can allow you to buy fractions of a stock and buy as many shares as you want. Your IRA rate of return will then be based on the investments you choose or, more specifically, on how much you invest in stocks compared to bonds and on the performance of those markets.
Mutual funds are generally purchased directly from investment companies rather than from other investors on an exchange. Unlike ETFs, they don't have trading fees, but they do entail an expense ratio and possibly other selling fees (or “charges”). Including ETFs in your Roth IRA can be an economical and effective way to invest for your retirement. Most ETFs are passively managed and track indices and sectors, resulting in lower spending rates.
Both may have a place in your portfolio, but because of the ease of buying and selling and possibly the more favorable tax treatment, many IRA investors are finding that ETFs are better suited to their goals and objectives than mutual funds.
