Eight Great Funds for Your IRA
From conservative bond funds to cheap index funds, find the right one for you.
IRA season is upon us, and we're here to help. Christine Benz, Morningstar's director of personal finance, tackled the tricky topic of converting traditional IRAs to Roth IRAs a couple of weeks ago and spelled out an array of Dos and Don'ts.
Today, I'll tell you about some of the best funds to put in your IRA. One of the things that gives investors headaches is figuring out what type of mutual funds to put in their IRAs. Because they are tax-sheltered, it can make sense to put funds that are not tax-efficient in them. Taxable-bond funds are among the least tax-efficient options, but the catch is that they are also generally better for intermediate investment needs. Because you may not be tapping the money in your IRA for decades, an equity fund might be a better fit even though they are generally more tax-efficient.
I'd suggest that you let your circumstances dictate your fund selection. If your next IRA contribution is going to be a small piece of your overall investment pie or you are years away from the date at which you expect to start withdrawing money, then go with something tax-inefficient. On the other hand, if your IRA is a big piece of your portfolio and you are a long ways away from retirement, forget about tax inefficiency and focus on finding a great core holding. Here, then, are four from each bucket.
Russel Kinnel does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.