The Vanguard Group is one of the world's largest investment management and advisory services companies. It primarily manages mutual funds and exchange-traded funds (ETFs) with about $9.7 trillion in assets under management (AUM) as of March 31, 2024. Founded in 1975, the company of𒁃fers a ൲total of 423 funds, 208 of which are available in the U.S. Vanguard is a full-service broker, offering low-cost investing for long-term buy-and-hold investors and retirement savers.

American investors have access to several tax-advantaged saving plans, including 401(k)s, individual retirement accounts (IRAs), and Roth IRAs. The main difference between a Roth IRA and a traditional IRA is that the former is funded with after-tax dollars. That means that contributions to Ro😼th IRAs are not tax-deductible, as they are with traditional IRAs.

Unlike a traditional IRA where withdrawn funds are taxed, a Roth IRA allows investors to withdraw funds tax-free. The figures for each fund are present as of October 1, 2024🦩.🌸

Best Types of Funds for a Roth IRA

A Roth IRA is a qualified retirement account funded with after-tax dollars that grows on a tax-exempt basis. A traditional IRA, on the other hand, uses pre-tax dollars, giving the account holder a tax deduction for the contribution year. Traditional IRAs grow tax-deferred, where income tax must be paid on contributions and gains at the time of withdrawal in the future.

Since the Roth IRA comes with no deferred tax liability, it is best to use it to benefit from the tax exemption. This means identifying high-yield investments that pay a high and steady stream of income in the form of interest, 澳洲幸运5官方开奖结果体彩网:dividends, or other distributions. Some options to include in a Roth that can act as tax s♍helters are:

• Bonds because they pay regular interest
• 澳洲幸运5官方开奖结果体彩网:Re🌟al estate investment funds (REI𒊎Ts) because they pay at least 90% of their operating income as dividends
• 澳洲幸运5官方开奖结果体彩网:Preferred shares because they pay relatively high and regular dividends

Roth IRAs come with annual contribution limits. The annual limit for 2024 is $7,000. Individuals 50 and older can contribute an additional $1,000 for a total of $8,000. Keep in mind that your income may limit whether you're able to contribute to a Roth IRA. In 2024, the phaseout range for indiv♑iduals who contribute to Roth IRAs is:

• $146,000 and $161,000 for singles and heads of household
• $230,000 and $240,000 for married couples filing jointly
• $0 and $10,000 for married couples filing separately

Vanguard Total Stock Market ETF (VTI)

• Expense Ratio: 0.03%
• AUM: $1.7 trillion
• 12-Month Trailing (TTM) Yield: 1.98%
• 1-Year Trailing Total Return: -8.23%
• Inception Date: May 24, 2001

The Vanguard Total Stock Market ETF (VTI) aims to track the performance of the CRSP US Total Market Index. As an ETF, VTI offers investors access to a broad portfolio of equities, and shares of VTI can be traded throughout the day like a stock. VTI is passively managed, utilizing an 澳洲幸运5官方开奖结果体彩网:index-sampling strategy that keeps investor expenses low.

As of Oct. 31, 2024, VTI's portfolio consists of 3,654 stocks, with the top 10 accounting for about 25% of total invested assets. The fund's holdings include large-cap, mid-cap, and small-cap equities across growth and value styles. The median market cap of VTI's holdings is $179.3 billion. Virtually all of the holdings are U.S.-based companies; only 0.24% are foreign.

Investors who want to create wealth through price appreciation should consider a broad-based equities fund such as VTI. Although equities have higher 澳洲幸运5官方开奖结果体彩网:volatility than bonds, they have a track record of returning more over a long period of time. If investors have a low-risk tolerance or are nearing retirement, they might consider a more income-oriented portfolio.

Vanguard Total Bond Market ETF (BND)

• Expense Ratio: 0.03%
• AUM: $336.4 billion
• 12-Month Trailing (TTM) Yield: 2.42%
• 1-Year Trailing Total Return: -9.76%
• Inception Date: April 3, 2007

The Vanguard Total Bond Market ETF (BND) tracks the Bloomberg U.S. Aggregate Float Adjusted Index, a broad, market-weighted index. This ETF gives investors broad exposure to the taxable investment-grade U.S. dollar-denominated bond market. The fund excludes inflation-protected and tax-exempt bonds.

As of Oct. 31, 2024, BND holds 11,254 bonds. The average duration of a BND bond is 6.0 years, and the 澳洲幸运5官方开奖结果体彩网:average effective maturity was 8.3 years. Just over two-thirds of bonds are U.S. government bonds. While the remaining third is investment-grade debt, 13.40% of the total is BBB bonds, which are among the lowest-rated on the investment-grade ladder.

BND is intended to serve as a core 澳洲幸运5官方开奖结果体彩网:bond holding for investors. Bonds generally have low volatility and provide a steady supply of interest payments to the investor. Income in a Roth IRA account is tax-free, making it an ideal place to hold these kinds of investments. A broad-based bond fund is typically a lower-return, lower-risk investment vehicle than a stock fund. As a result, bonds can be useful both for risk-averse investors and for portfolio diversification.

The Vanguard REIT Index ETF (VNQ)

• Expense Ratio: 0.13%
• AUM: $70.5 billion
• 12-Month Trailing (TTM) Yield: 3.47%
• 1-Year Trailing Total Return: -13.25%
• Inception Date: Sept. 23, 2004

The Vanguard REIT Index fund ETF (VNQ) invests in stocks issued by REITs. These are companies that purchase and manage office buildings, hotels, and other real property. This REIT tracks the MSCI US Investable Market Real Estate 25/50 Index. This index is primarily an 澳洲幸运5官方开奖结果体彩网:equity REIT index, and the VNQ holds REIT shares in 155 different companies.

Because REITs must pay out 90% or more of their operating income as dividends to shareholders, REIT funds tend to have relatively high yields. These can cause a series of taxable events that are deferred in a Traditional IRA, but which are exempt in a Roth. As a result, a Roth IRA is a good place to hold REITs.

Take note that REIT funds are quite sensitive to intere🍷s♐t rates, and share prices can fall sharply as rates increase. This is because the cost of financing properties, such as mortgages, also increases as interest rates rise.

The Bottom Line

Roth IRAS can be an effective tool for retirement saving, and broad bond and stock funds provide diverse, inexpensive foundations. Investors may wish to go further depending upon how much time, energy, and 澳洲幸运5官方开奖结果体彩网:risk tolerance they have f🐠or investing. For many investors who are short on time, it's a practical decision to pick a few large, diverse bond and stock funds and continue to invest in those. Some investors will choose another course, by opting to add investments in individual companies, including 澳洲幸运5官方开奖结果体彩网:riskier small-cap stocks, and through targeted sector investing and 澳洲幸运5官方开奖结果体彩网:stock analysis.

Correction—July 22, 2024: This article was corrected to state that income in a Roth IRA account is tax-free.