Key Takeaways ETFs typically have lower fees than mutual funds, making them a profitable investment. ETFs are traded on an exchange like stocks, which provides flexibility. Growth and income ETFs can be a good option to include in a Roth IRA because earnings and withdrawals from investments are tax-free. In general, ETFs are more tax-efficient than mutual funds.
Keep in mind that this is irrelevant when investing in a retirement account, such as an IRA or a Roth IRA. But if you're investing in a taxable brokerage account, the tax differences can be significant. The best funds to invest in an IRA or 401 (k) are long-term investments, such as stock mutual funds and ETFs. If you invest in a 401 (k) or 403 (b) through your employer, there is a good chance that you have index mutual funds as an investment option, but not ETFs.
The best exchange-traded funds (ETFs) for your Roth IRA will include funds designed for long-term investments.