Misconceptions

• A Roth IRA is not an investment by itself; it is merely an account type. You must choose how to invest the money in your Roth IRA.
  
  

Types

• The only limitations Roth IRAs imposed by the IRS are that you cannot invest in collectible items nor can you invest in something to personally benefit yourself. Common investments include certificates of deposit, money market deposit accounts, stocks, mutual funds and real estate.
  
  

FDIC Insurance

• Some Roth IRA investments such as money market deposit accounts and certificates of deposit are covered under FDIC insurance, which protects your money in case the financial institution goes bankrupt.
  
  

Limits of FDIC Insurance

• Only the first $250,000 of money in covered accounts in your Roth IRA are covered at each financial institution. For example, if you have $300,000 in certificates of deposit in a Roth IRA at your bank, the FDIC protects only the first $250,000.
  
  

Other Investments

• Other investments such as stocks or mutual funds are riskier because they are not protected by FDIC insurance. But these investments usually offer a higher rate of return so for many, the reward outweighs the risk.