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Funds: mutual funds are generally an excellent investment for a Roth IRA. Mutual funds offer professional money management, diversification of assets, and a variety of objectives. There are literally thousands of funds available, depending on your needs. Since their inception nearly 80 years ago, stock growth mutual funds have averaged around 12%.

Wait! Before you run out and throw all that money into a stock growth mutual fund, keep in mind the relationship between risk and reward, and whether or not that type of investment is suitable for you. The following overview of fund objectives should help you manage risk while getting the highest rate of return:

1)Income funds: objective is income generation consistent with safety and stability of principal. An income fund is suitable for those who have built their nest egg and are ready to reap the rewards of their investments at retirement.

2)Conservative funds: objective is income generation with a secondary objective of maintaining purchasing power. A conservative fund attempts to keep up with inflation, while protecting the principal amount.

3)Balanced funds: objective is income generation and the potential of growth equity. Those in balanced funds are generally approaching retirement, but not so close as to completely avoid risk.

4)Growth funds: objective is long-term growth of principal. Those who are far from retirement generally invest in growth funds for the long term.

5)Aggressive growth funds: objective is long-term appreciation of principal. For those emotionally stable enough to withstand downturns in the market, high growth funds, for the long term, give the highest rates of return.

Millions of Americans have retired with millions of dollars because they took advantage of the Rule of 72 by investing in mutual funds, and took advantage of tax-deferred savings by sheltering that money in a Roth IRA.

This is by no means an exhaustive list of the different investments available for a Roth IRA, but it should provide a solid foundation in understanding the rate of return you could expect to get from your investments. As with any investment, educate yourself and seek sound advice from a variety of sources. Although there is risk involved in any investment, the greatest risk is to do nothing. So what are you waiting for? Open a Roth IRA today.

Learn more about this author, Trent Lorcher.
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