Investing ideas for your IRA

Don't skimp on growth. Invest your IRA money so it works for you.

  • Saving for Retirement
  • IRA
  • Roth IRA
  • Saving for Retirement
  • IRA
  • Roth IRA
  • Saving for Retirement
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Key takeaways

  • When choosing investments, think about how comfortable you are with risk.
  • Make sure that the amount of any stocks, bonds, and short-term securities in your asset mix reflects your time frame for investing (and the associated need for growth).

You've contributed to an IRA—congratulations. The next step is to invest that money—and give it the potential to grow. Fidelity believes one of the best ways to do that over the long term is by considering an appropriate amount to invest in a diversified portfolio of stock mutual funds, exchange-traded funds (ETFs), or individual stocks as you plan and implement an investment strategy that fits your time horizon, risk preferences, and financial circumstances.

As a general rule, the more time you have to save, the greater the percentage of your money you can consider allocating to stocks. For those closer to retirement, a healthy allocation to stocks may still be appropriate. These days retirement may last for decades, so the money will likely still need to grow for many years even after you retire.

How much in stocks based on risk

It's important that your stock exposure matches your comfort with risk, investment horizon, and financial situation. With the right asset mix, you should feel comfortable that the ups and downs of the stock market won't undermine your ability to reach your long-term goals. That way you'll be less likely to panic and sell when stocks fall—because doing so would lock in losses and could make it harder to recover and reach your goals.

How much risk can you stomach? Take a look at the worst case market scenarios for the 4 different investment mixes shown below. During the worst market year since 1923, the conservative portfolio would have lost the least—17.67%, while the aggressive portfolio would have lost the most—60.78%. The chart also shows how each investment mix performed over a long period of time, in different markets. The average return: 5.96% for the conservative vs. 9.65% for the aggressive mix.

How much in stocks based on age

Age can also be used as an initial guideline when determining how much to invest in stocks when you're investing for retirement. That's because the longer the money will be invested, the more time there is to ride out any market ups and downs. That could help realize the potential for growth in your investments which may be an important factor in saving enough for retirement. In general, the younger you are, the heavier your investment mix could tilt toward stock mutual funds or ETFs—as much as you are comfortable with and fits with your time horizon, risk preferences, and financial circumstances. The chart shows how a $5,500 IRA investment could grow to $58,721 over 35 years.

All else equal, as you get closer to retirement, you may want to adjust your allocation. Being too aggressive could be risky as you have less time to recover from a market downturn. As a general rule, in the absence of changes to risk tolerance or financial situation, one's asset mix should become progressively more conservative as the investment horizon shortens. However, investing too conservatively could limit the growth potential of your money. So, it may make sense to gradually reduce the percentage of stocks in your portfolio, while increasing investments in bonds and short-term investments.

But don't forget that growth remains important even as you approach and then enter retirement—after all, your retirement could last 3 decades or more. But with retirement nearer, investors must balance that need for growth against the need to protect what they have saved.

To learn more about building an asset mix that fits you, read Viewpoints on Fidelity.com: How to start investing.

What kind of investor are you?

Don't have the time, expertise, or interest it would take to choose investments and maintain an appropriate mix of investments in your IRA? Consider a professionally managed account, target date, or asset allocation fund.

Target date funds let an investor pick the fund with the target year closest to their expected retirement. The target date fund manager then selects, monitors, and adjusts the investment mix over time. Asset allocation funds, sometimes called target risk funds, can be another simple way to diversify your portfolio using a single fund. In these funds, the manager sets and maintains a fixed asset mix.

For those doing it on their own, a diversified mix of investments is important. That way, a portfolio isn't dependent on any one type of investment, although diversification does not ensure a profit or guarantee against loss. If you want to do it yourself, consider funds that hold a mix of investments in companies both big and small, from different parts of the world, and in different industries and sectors.

Low-fee investments, such as index funds or exchange-traded funds (ETFs) that simply track the broad market through a benchmark index, may also be worth considering.

Get started

When saving for something really big, like retirement, it's important to get invested as soon as possible. That's because time is one of your biggest assets when investing for the long term.

Here are 3 ways to help get started when investing in an IRA.

  1. Use our tools.
    Get an analysis of your current portfolio, assess your financial situation, and find ideas to help you create an appropriate investment strategy in our Planning & Guidance Center.
  2. Choose investments.
    For those who want to invest in mutual funds or ETFs, there are a number of ways to choose.
  3. Let someone else do the work.
    For those who prefer to have an investment professional manage an IRA, learn about Fidelity managed accounts.

Put your money to work

Across most investment time frames, investing for growth matters. The potential for growth in your investment mix can be vital to helping you save enough to live the life you want in retirement. Ultimately, the appropriate asset mix is one you can live with—one that reflects your risk tolerance, investment horizon, and financial situation.

Next steps to consider

Learn about your options for investing your retirement savings.

Pick funds based on your risk tolerance and financial situation.

Learn how diversification may help you reduce risk.

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This information is intended to be educational and is not tailored to the investment needs of any specific investor.

Before investing in any mutual fund or exchange-traded fund, you should consider its investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus, offering circular or, if available, a summary prospectus containing this information. Read it carefully.

1. Data Source: Ibbotson Associates. Stocks are represented by the Dow Jones Total Market Index from March 1987 to latest calendar year. From 1926 to February 1987, stocks are represented by the Standard & Poor's 500 Index (S&P 500 Index). The S&P 500® Index is a market capitalization–weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance. Bonds are represented by the Barclays U.S. Aggregate Bond Index from January 1976 to the latest calendar year. The Barclays U.S. Aggregate Bond Index is a market value–weighted index of investment grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of one year or more. From 1926 to December 1975, bonds are represented by the U.S. Intermediate Government Bond Index, which is an unmanaged index that includes the reinvestment of interest income. Short-term instruments are represented by U.S. Treasury bills, which are backed by the full faith and credit of the U.S. government. Indexes are unmanaged, and you cannot invest directly in an index. Foreign stocks are represented by the Morgan Stanley Capital International Europe, Australasia, Far East Index for the period from 1970 to December 2000. From December 2000 to the last calendar year foreign stocks are represented by Morgan Stanley Capital International All Country World Index Ex-U.S. Foreign stocks prior to 1970 are represented by the S&P 500® Index. The purpose of the target asset mixes is to show how target asset mixes may be created with different risk and return characteristics to help meet an investor's goals. You should choose your own investments based on your particular objectives and situation. Be sure to review your decisions periodically to make sure they are still consistent with your goals.

Past performance is no guarantee of future results.

Diversification and asset allocation do not ensure a profit or guarantee against loss.

Investing involves risk, including risk of loss.

Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Investing in stock involves risks, including the loss of principal.

Target date investments are generally designed for investors expecting to retire around the year indicated in each investment's name. The investments are managed to gradually become more conservative over time. The investment risk of each target date investment changes over time as the investment's asset allocation changes. The investments are subject to the volatility of the financial markets, including that of equity and fixed income investments in the U.S. and abroad, and may be subject to risks associated with investing in high-yield, small-cap, and foreign securities. Principal invested is not guaranteed at any time, including at or after the investments' target dates.

ETFs are subject to market fluctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses. Unlike mutual funds, ETF shares are bought and sold at market price, which may be higher or lower than their NAV, and are not individually redeemed from the fund.

ETFs are subject to market fluctuations of their underlying investments and may trade at a discount to NAV.

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Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

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