You can invest the money you contribute to
an
IRA
almost any way you wish.
For example, you might buy individual
stocks
and
bonds,
mutual funds
that invest in stocks, bonds, or a combination
of both, managed accounts, or
real estate investment trusts (REITS).
The only limitations are that you can’t buy collectibles,
art, gems, or non-U.S. coins.
The tax-deferred difference
What’s sometimes confusing is that you
can own the exact same investments inside and outside an IRA if
you wish. The only difference is that earnings on the investments
you own in the IRA are
tax deferred
or tax free — depending
on whether it’s a traditional or Roth IRA — and earnings
on non-IRA investments are taxable each year.
Because IRA earnings aren’t taxed as
they accumulate, you can sell investments in the account that
have increased in value and use your gain to make additional investments.
You don’t owe tax on the
capital gain
— though any transaction
fees will be subtracted from your account value.
