Roth IRA Fund Options From TD Ameritrade (2024)

TD Ameritrade, which was acquired by Charles Schwab Corp. (SCHW) in 2020, provides a full suite of brokerage products and services. It offers an online trading platform with a variety of investment options and trading tools for both beginner investors and seasoned traders. The company also offers financial research and educational material to help investors build a portfolio suited to their risk tolerance and financial goals.

Investors can open a Roth individual retirement account (Roth IRA) with TD Ameritrade, which offers access to thousands of mutual funds and exchange-traded funds (ETFs) with which to build their portfolio. The company provides investing and trading services for millions of client accounts, which total over $9 trillion in assets.

TD Ameritrade’s roots go back to 1975 following the abolition of fixed-rate brokerage commissions by the U.S. Securities and Exchange Commission (SEC). First Omaha Securities Inc., which later evolved into TD Ameritrade, became one of the first firms to start offering discounted commissions. TD Ameritrade’s offerings have expanded since then, and it now provides investors with all of the services of a full-service brokerage. That includes access to investment guidance from professional advisors through Schwab, the company’s affiliate. TD Ameritrade customers also have access to robo-advisory services and can trade stocks, ETFs, and options on TD Ameritrade’s online platform with zero commission fees, a key feature typical of discount brokers.

Investors in the United States have access to several tax-advantaged saving plans offered by a broad range of other financial services companies, including401(k)s, IRAs, andRoth IRAs. The maindifference between a Roth IRA and a traditional IRAis that the former is funded with after-tax dollars. This means that contributions to Roth IRAs are not tax deductible, as they are with traditional IRAs. But unlike atraditional IRA, where withdrawn funds are taxed, a Roth IRA allows investors to withdraw funds tax-free.

All data in the bullet point lists for each fund below are as of July/August 2024, unless otherwise indicated.

Vanguard Total Stock Market ETF (VTI)

• Expense Ratio: 0.03% (as of April 26, 2024)
• Assets Under Management: $419.1 billion (July 31, 2024)
• One-Year Trailing Total Return: 20.24% (August 9, 2024)
• 12-Month Trailing (TTM) Yield: 1.34% (August 9, 2024)
• Inception Date: May 24, 2001

Vanguard Total Stock Market ETF (VTI) is an ETF that aims to track the performance of the CRSP U.S. Total Market Index, an index composed of thousands of stocks across the market capitalization spectrum and which represents approximately 100% of the U.S. investable equity market. The fund provides broad, diversified exposure to the U.S. equity market.

Gerard O’Reilly, Walter Nejman, and Michelle Louie manage this fund. O’Reilly has advised the fund since 2001, Nejman since 2016, and Louie since 2023.

Of the ETF’s 3,674 holdings, 71.6% arelarge capstocks, 3.6% are somewhere between midcap and large cap, 12.8% aremidcap, 5.1% are between small cap and midcap, and 6.9% aresmall cap. The average market cap within the fund is $884.9 billion. These portfolio characteristics are as of June 30, 2024.

VTI is one of the cheapest broad stock funds on TD Ameritrade’s platform and has the most holdings, making it a top broad-based stock fund for investors looking to build a Roth IRA portfolio. A single broad stock fund is normally sufficient for most investors looking to build a long-term retirement portfolio. A total stock market fund, like VTI, is preferable to an S&P 500 index fund because it offers greaterdiversificationby providing exposure to small-cap and midcap stocks in addition to large caps.

TD Ameritrade does offer other broad-based stock funds at the same low cost as VTI. While these are also good options for a Roth IRA, VTI has the greatest number of holdings and thus provides the most diversified exposure to the U.S. equity market. But the difference in performance and risk may be minimal.

A broad-based equity fund like VTI carries a certain degree of risk, but it also provides investors with fairly strong growth opportunities. For many investors, this ETF may act as the foundation of a well-diversified investment portfolio. However, for those with a very lowrisk toleranceor who are approaching retirement, a more income-oriented portfolio may be a better option.

BNY Mellon Core Bond ETF (BKAG)

• Expense Ratio: 0.00%
• Assets Under Management: $1.81 billion (as of August 9, 2024)
• One-Year Trailing Total Return: 6.2% (as of August 9, 2024)
• 12-Month Trailing (TTM) Yield: 3.75% (as of August 9, 2024)
• Inception Date: April 22, 2020

BNY Mellon Core Bond ETF (BKAG) is a passively managed ETF that aims to track the performance of the Bloomberg Barclays U.S. Aggregate Total Return Index, a broad-basedbenchmarkthat gauges the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market.The fund provides investors with broad exposure to the overall U.S. bond market.

Nancy G. Rogers and Gregory A. Lee manage the fund and have done so since 2020.

Of the fund’s 4,734 holdings, 43.24% are Treasurys, 25.41% are agency fixed-rate bonds, and the remaining 31.35% are bonds or other debt securities issued by entities operating in the following market sectors: banking, consumer noncyclical, communications, technology, energy, electric, consumer cyclical, and capital goods. These portfolio characteristics are as of July 31, 2024.

With an expense ratio of 0%, BKAG is among the cheapest broad-based bond funds offered by TD Ameritrade. It tracks a broad bond index, similar to other funds on TD Ameritrade’s platform, and has more than enough liquidity for any retail investor.

Broad-based bond or fixed-income funds are generally less risky than equity funds. However, bond funds don’t provide the same growth potential, which means generally lower returns. They can be useful tools both for risk-averse investors and as part of a portfolio diversification strategy. Consistent withmodern portfolio theory, risk-averse investors will find that investing in both a broad-based bond fund and a broad-based equity fund provides diversification. It is an approach that tends to maximize returns while minimizing risks.

Traditional wisdom suggests that that the precise mix of stocks and bonds in a long-term portfolio should follow the 60/40 rule—60% stocks and 40% bonds—and that the proportion of stocks to bonds should shrink as the investor ages. But conventional wisdom has changed, and many financial advisors and prominent investors, including Warren Buffett, now recommend that holding a higher percentage of stocks throughout an investor’s career can greatly enhance potential returns while only marginally increasing risk. But investors should always consider their own financial needs and appetite for risk before making any investment decision.

Frequently Asked Questions (FAQs)

The Bottom Line

A Roth IRA offers investors certain tax advantages. Roth IRAs are unique in that they are funded with after-tax dollars and are not taxed when the funds are withdrawn at a later date.In short, funds invested in a Roth IRA can grow tax-free. After opening a Roth IRA, the types of investments chosen will depend on the individual investor’s risk tolerance and how much time and energy they have to research various investments.

For investors with little time and energy, one option is to go with a few large and diversified funds,allocating part of their money to a broad-based stock fundand another part to a broad-based bond fund. These large, diversified funds also may create a solid foundation for many investors who do have the extra time and energy toevaluate other, sometimes riskier, investment options involvinginvestments in individual companies or specific niches of the market, such assmall cap stocks.