Best Roth IRA Investments – NerdWallet

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Because capital gains, dividend income and interest income on investments inside a Roth IRA aren’t taxable, how people invest the money in a Roth IRA can benefit from a bit of strategy. The less tax-efficient an investment is, for example, the bigger the benefit of holding it in a Roth IRA instead of a taxable brokerage account or even a traditional IRA.

To make the most of your investment, here’s how to choose investments for your Roth IRA.

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How should you invest in a Roth IRA?

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

High growth potential, such as individual stocks that could dramatically rise in value.
High levels of buying and selling, such as actively managed mutual funds.
Frequent trading events, where investor activity triggers taxable events.

What are the best assets for a Roth IRA?

In general, 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, are less attractive assets for a Roth IRA because their returns probably won’t cause a huge tax burden down the road. Investments that pay dividends may also be a good fit (provided you reinvest them) because 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:

Although these investments help maximize untaxed growth, they also come with considerable risk.

Small-cap stocks tend to be unproven companies with volatile stock prices.
High dividend stocks don’t necessarily have reliable dividends, so they 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 is an S&P 500 ETF, which tracks the performance of the S&P 500 index. Since all these ETFs attempt to mirror the S&P 500, a key differentiator might be their expense ratio.

ETF	Ticker	Annualized 5-year return	Expense ratio
iShares Core S&P 500 ETF	IVV	14.18%	0.03%
Vanguard S&P 500 ETF	VOO	14.17%	0.03%
SPDR S&P 500 ETF Trust	SPY	14.11%	0.095%
Source: Morningstar. Data is current as of Feb. 4, 2026, and is for informational purposes only.

In addition to investing in an ETF that tracks the S&P 500, you could also invest in ETFs that track some of the asset options 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.

Ticker	Company	Performance (Year)
SILJ	Amplify Junior Silver Miners ETF	210.50%
SGDJ	Sprott Junior Gold Miners ETF	170.81%
FDTS	First Trust Developed Markets ex-US Small Cap AlphaDEX Fund	54.81%
BRF	VanEck Brazil Small-Cap ETF	52.95%
AVDV	Avantis International Small Cap Value ETF	51.70%
ASHS	Xtrackers Harvest CSI 500 China A-Shares Small Cap ETF	50.52%
DISV	Dimensional International Small Cap Value ETF	47.59%
Source: Finviz. Data is current as of 2026-02-03 and is intended for informational purposes only.

Ticker	Company	Performance (Year)
EWY	iShares MSCI South Korea ETF	133.85%
EPU	iShares MSCI Peru and Global Exposure ETF	124.08%
FLKR	Franklin FTSE South Korea ETF	122.22%
MKOR	Matthews Korea Active ETF	97.42%
EMEQ	Nomura Focused Emerging Markets Equity ETF	85.02%
ROAM	Hartford Multifactor Emerging Markets ETF	84.16%
AFK	MVIS GDP Africa Index	74.92%
EMDM	First Trust Bloomberg Emerging Market Democracies ETF	72.36%
FTHF	First Trust Emerging Markets Human Flourishing ETF	72.13%
Source: Finviz. Data is current as of 2026-02-03 and is intended for informational purposes only.

The best high-dividend ETF is Invesco KBW Premium Yield Equity REIT ETF (KBWY), which currently has a dividend yield of 9.21%.
Ticker	Company	Dividend Yield
KBWY	Invesco KBW Premium Yield Equity REIT ETF	9.21%
DIV	Global X SuperDividend U.S. ETF	6.72%
XSHD	Invesco S&P SmallCap High Dividend Low Volatility ETF	5.84%
SPYD	State Street SPDR Portfolio S&P 500 High Dividend ETF	4.15%
Source: Finviz. ETF data is current as of February 10, 2026, and is intended for informational purposes only.

The best-performing REIT stock by one-year return is DHC (Diversified Healthcare Trust), which is up 133.21%.
Ticker	Company	Performance (Year)
DHC	Diversified Healthcare Trust	133.21%
PKST	Peakstone Realty Trust	94.20%
AHR	American Healthcare REIT Inc	68.74%
CTRE	CareTrust REIT Inc	47.04%
ILPT	Industrial Logistics Properties Trust	42.31%
WELL	Welltower Inc	38.53%
Source: Finviz. Data is current as of February 10, 2026 and is for informational purposes only.

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 ordinary 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 already deducted on your income taxes).
Roth IRA: Withdrawals of both contributions and earnings (which have grown tax-free) from a Roth IRA are typically not taxable as long as you’ve held the account for five years and are at least 59½. That’s because you funded the account with money the IRS already taxed.

See where you stand compared to households like yours, and get steps you could take to grow from here.

NWWP is an SEC-registered investment adviser. Registration does not imply skill or training. Calculator by NerdWallet, Inc., an affiliate, for informational purposes only.

What else should you consider?

On top of taxes 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 of a Roth account. For example, dividends paid on municipal bonds are already exempt from federal taxes.

Dividends from REITs, on the other hand, are not out of the IRS’ reach. And because REITs are known for generous dividends, the Roth can be 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 usually taxed at a higher rate than long-term capital gains.

For active traders, a Roth IRA can be 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. 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 may be and the more money you may save by avoiding a tax bill when you eventually withdraw the money.

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