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In my experience with investing in IRAs, it seems like you just tell the people that you want to retire in (insert number of years), tell them how risky you're willing to be with your money and then they just throw your money wherever they want.

Yes, I want to make money with my investments but I also want to be able to have a little more say in where my money is being invested. For example, I'd like to keep my money from going to large companies like Amazon, Google, Apple, Facebook, etc. and invest more in companies that are focused on things like sustainability, green energy, and the like. That's not to say that I want to be able to pick specific companies but just companies with more like minded goals.

Am I just looking at Roth IRAs through the wrong investment companies? Are there other investment companies that offer these kinds of options?

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  • Note that the "target date retirement portfolios" that you mention are frequently what's promoted the most because most people want a more hands-off approach. A lot of people aren't financially savvy and can get completely lost if you offer them too many details, so a lot of the "power user" options like you want are a bit harder to find. They're still there, though.
    – bta
    Sep 3 at 22:31
  • @bta: The hands-off approach is true for those of us who invest in mutual funds of any sort, inside or outside of retirement accounts. I might pick index funds, or perhaps I might, like the OP, pick funds that align with my personal ethics, but I can just pick what I want and be done with me. It's not that I couldn't handle all those details, it's that have more enjoyable things to do with my time :-)
    – jamesqf
    Sep 4 at 17:02
  • 3
    "Am I just looking at Roth IRAs through the wrong investment companies?" To sum it up: yes.
    – RonJohn
    Sep 7 at 14:48
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It sounds like you have IRAs with a financial/investment advisor attached. Some firms specialize in this and don't really offer IRAs that you can (easily) manage yourself. These can vary from shady (they invest for the maximum commission) to helpful (you tell them how long until retirement and they do the rest). Regardless, it's your money so you should be able to see how it's invested and change that as you like.

If you want to cut out the investment advisor, open an IRA that doesn't have an advisor attached. Any of the bigger investment brokers like Schwab, Vanguard, E*Trade, Fidelity, and many others offer this.

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  • 2
    +1 for the list of discount brokers for OP to do it themselves. TD is being merged with Schwab, so if OP chooses that route, I would suggest just starting the account at Schwab directly instead of waiting for it to be converted over. Also, add Fidelity to the list of good discount brokers. Sep 3 at 16:03
  • E*Trade is another one where you can easily self-manage a ROTH IRA. Sep 4 at 5:34
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There is nothing about an IRA or Roth IRA that limits you to investing only in mutual funds or ETFs.

You can use it to invest in companies you pick. You can invest it in bonds or bond funds.

The mechanics of doing so depend on which investment company you are using. The costs and limits are set by their rules. The amount of new money that you can add each year are set by US federal tax law.

it is easier to mention the things you can't invest in:

What types of investments can I make with my IRA?

The law does not permit IRA funds to be invested in life insurance or collectibles.

If you invest your IRA in collectibles, the amount invested is considered distributed in the year invested and you may have to pay a 10% additional tax on early distributions.

Here are some examples of collectibles:

  • Artwork,
  • Rugs,
  • Antiques,
  • Metals - with exceptions for certain kinds of bullion,
  • Gems,
  • Stamps,
  • Coins - (but there are exceptions for certain coins),
  • Alcoholic beverages, and
  • Certain other tangible personal property.

Check Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs), for more information on collectibles.

IRA trustees are permitted to impose additional restrictions on investments. For example, because of administrative burdens, many IRA trustees do not permit IRA owners to invest IRA funds in real estate. IRA law does not prohibit investing in real estate, but trustees are not required to offer real estate as an option.

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  • In addition to the types/categories in that Q, an IRA cannot do any type of transaction with the owner, their family, or beneficiary; thus you can't set up a company and have the IRA invest in it -- even though that company could perfectly match your desired ethics (re energy, conflict materials, employment, transparency, whatever). Sep 5 at 2:01
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An IRA is simply an investment account with a status flag flipped from "taxable account" to "IRA" or "Roth IRA". This gives it the tax status of an IRA, and restricts certain transactions e.g. distributions when under age 59-1/2.

As such, it is a simple thing for almost anyone who offers investment accounts to offer an IRA version of those accounts.

Your current setup

It sounds like your current setup is a very full-service brokerage, where you just bring them money and then they do weird black magic with investing, and they give you monthly reports usually saying how the money is worth more than last month, and you go "hooray". Usually the services of these companies are "free".

What's really happening behind the scenes is they are investing it cleverly so they hoard for themselves a big part of your growth. On paper it looks like you got all the growth, but in reality, they are siphoning off a great deal of your growth in expenses and fees.

These companies are also fond of selling extremely complex financial products which are hard to understand even for people like me. That is on purpose, to hide more expenses and fees, and to make their growth appear better than it is.

Real growth is simple. If you chose to take an interest in the subject, you could understand enough to invest more successfully than what they're doing.

My rule is simple: a product you don't understand is a product you don't purchase.

Mutual funds: a basket of stocks

The mainstay of DIY retirement investment is mutual funds. A mutual fund is simply a basket of stocks. Let's suppose I create a mutual fund called AGMAF. 1 share of AGMAF is trading for $500 and contains $100 worth of Apple, $100 worth of Google, $100 worth of Microsoft, Amazon and Facebook each.

Of course, next year, they all grew 20% except for Apple which grew 60% and Amazon which lost 20%. So now the component stocks are worth $160, $120, $120, $80 and $120. Total $600. So that means 1 share of AGMAF is worth $600 now.

Get it?

Except, my time isn't free. Me and my staff need our salaries paid. So we deduct what's called an expense ratio from the fund, in this case it's 0.25% (1/4 of 1%) since managing 5 tech stocks is pretty easy. That is $1.50. So after we deduct that expense ratio, 1 share of AGMAF is worth $598.50.

Last year it was $500, so you gained 19.75%.

The expense ratio is charged even if the fund loses money. It's a guaranteed loss to you, but 0.25% isn't bad.


Normally, "which stocks are in a mutual fund" is managed by a genius stock picker, a "Rain Man" (or more accurately, "Rain Monkey") of stock picking. This person gets a huge salary in the million$, and the fund's expense ratio reflects that: with an expense ratio typically 1.5% a year.

However, the entire market generally rises on its own, as the economy gets stronger. So you could literally stick a list of all stocks on the wall and have a monkey throw poo at it, and the monkey would make money also. It isn't really about beating zero - the monkey can do that - it's about beating the market average, aka the Index. An infinite number of monkeys will average out to the market index exactly - if they are picking S&P 500 stocks, the monkeys will do exactly as well as the S&P 500 index.

To beat that, you need a Rain Man stock picker for that. RIGHT?

Except, the monkey works for bananas. The stock picker has a HUGE salary that comes out of earnings. Can the managed fund beat the index/monkey by more than their typically 1.5% expense ratio? Science shows they cannot, except by getting lucky, like the monkeys.

So, it turns out the most powerful way to buy stocks is the most simple: buy them all, in the most cost-efficient way possible. This is called an "Index Mutual Fund" and the best have expense ratios as low as 0.04%.

My own portfolio is dominated by VTI, a mutual fund which attempts to buy and hold every publicly traded stock. Technically, it's an exchange-traded fund, which is a mutual fund (VTSMX in fact) packaged to trade like a stock itself, in real time.

Social activism in mutual fund holding

They have mutual funds for everything. Most of them serve the cause of making money for managers, but some of them pursue social causes.

So you can look at socially conscious mutual funds. They have a stated goal of the fund, and they are doing the research and keeping up on the latest. Again they will have the annoying expense ratio sapping profits, but, for 1.5% a year you could not possibly do the research they do.

Or, any competent brokerage account will let you buy individual stocks. So you could have piled on Gamestop if you saw a reason to do so.

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There are two aspects to your question:

That's not to say that I want to be able to pick specific companies but just companies with more like minded goals.

What you are looking for is something called socially conscious or socially responsible investing. There are mutual funds that specifically choose stocks to invest in that are “responsible” or “sustainable.” Of course, lots of people define those terms in different ways, so you need to do some research, but if you find a traditional mutual fund or ETF that aligns with your views, you can certainly invest in that inside an IRA.

In my experience with investing in IRAs, it seems like you just tell the people that you want to retire in (insert number of years), tell them how risky you're willing to be with your money and then they just throw your money wherever they want.

After you decide what you want to invest in, you can decide how to set up an IRA. If you have chosen a traditional (non-ETF) mutual fund, you typically set up an IRA account directly with the mutual fund company. Contact them to set it up.

If you are looking at an ETF (exchange-traded fund), then what you want is to set up an IRA with a brokerage firm. You'll then be able to place orders to buy and sell any individual stock or ETF that you want inside the IRA.

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    You addressed the type of investment (socially conscious) and the fact that IRA gives choices the OP didn't quite understand... and got a DV. Rolling my eyes on your behalf, and a +1. Sep 4 at 15:10
  • All IRAs are self directed. You can direct the money in the IRA to a index fund, or a actively managed fund, or an ETF, or individual investments. Or any combination of those options. The presence of a financial advisor is not linked to the place you park the IRA. Sep 5 at 11:53
  • @mhoran_psprep "Self-directed IRA" is one of those terms that can mean different things to different people. I have removed the term from my answer to avoid confusion. Sep 7 at 14:39
  • Ben - Indeed. I've seen that phrase to specifically mean an account that opens up other investment types such as real estate. I spent some time reading about the concept of having a Roth IRA put a down payment, get a mortgage, and buy a rental property. It seemed to me there were too many things that could go wrong, but that was when I saw "self directed" Sep 7 at 14:51

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