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I understand why/how I should put money into an IRA (basically a CD right?); however, what I don't understand is how investing that money works. So let's say for instance I open up an IRA with Fidelity. Are they then going to offer me some kind of managed portfolio for the money in that account? If the money is going to be in flux then how is it secure for them?

Obviously, there is something I am missing here. I mean why would they give me such a good interest rate if I am not able to provide them with the security of knowing that the money won't just disappear over night?

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an IRA (basically a CD right?)

No. IRA means Individual Retirement Account, and accounts are buckets.

Some companies (Fidelity, Vanguard, Charles Schwab, etc, etc) let you put almost anything in that bucket. Stocks, bonds, CDs, mutual funds, ETFs, even let it sit in "cash".

Other companies (read: banks) only let you put one type of thing (cash or CD) in a bucket.

Yet other companies let you put real estate in the bucket, and others allow you to put precious metals in your bucket at their firms.

Are they then going to offer me some kind of managed portfolio for the money in that account?

They'll offer, but you do not have to accept. I, for example, choose what stock and bond mutual funds and ETFs to put my money in.

If the money is going to be in flux then how is it secure for them?

It's a secure as the type of security you decide to invest your money in. If you're worried that that the IRA is going to become worthless, then don't put your IRA "eggs" in one basket named Enron. I, for example, diversify across a set of solid companies (Proctor & Gamble and Microsoft aren't going to stop making money hand over fist any time soon, and even if their stock values drop during a crash, they're still going to make money hand over fist, and investors will still want those stocks) using mutual funds.

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  • Are you sure that an IRA can invest in precious metals? I seem to remember that Publication 590a specifically includes metals as "collectibles" that are prohibited investments for IRAs with the exception of 1, 0.5, 0.25, and 0.1 oz gold coins or 1 oz silver coins minted by the US Treasury, and some platinum coins. – Dilip Sarwate Feb 7 at 19:55
  • @DilipSarwate en.wikipedia.org/wiki/Gold_IRA#IRA-accepted_precious_metals seems to indicate that yes, it's possible. – RonJohn Feb 7 at 20:45
  • Err, no. As your Wikipedia link points out, there are very specific requirements as to how precious metals must be held, and the list of what is acceptable is just a somewhat enlarged version of the abbreviated list in Publication 590a that I quoted above. So, a blanket assertion that investments in precious metals is permitted is a bit misleading especially when addressing a question from a newbie who is not sure what an IRA can hold. – Dilip Sarwate Feb 7 at 21:37
  • @DilipSarwate your comment confuses me. My answer doesn't say, "any kind or form of precious metal can be held in an IRA". – RonJohn Feb 7 at 22:05

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