Tax Strategies: What risky investments should be placed into a ROTH IRA for long-term growth?

The Roth IRA can be great for higher-risk investments because any gains grow completely tax-free, assuming you follow withdrawal rules. The question isn't just about what return rate makes sense, but about tax efficiency and your overall portfolio strategy. For something like crypto that has high growth potential but also high volatility, a Roth can be ideal because you won't pay taxes on massive gains if they happen. Even a 10x return over 30+ years would be completely tax-free in a Roth, which is significant compared to what you'd pay in capital gains taxes in a regular account. There's no specific minimum return threshold, but generally, you want to place investments with the highest growth potential in a Roth. This might include small-cap stocks, certain sector-specific ETFs, growth stocks, and yes, reasonable allocations to crypto or other alternative investments.

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Kinda going back to the original question, I put growth stocks in my Roth specifically because of the potential for outsized returns. Even if the specific return isn't astronomical, the compounding effect of not having to pay taxes on dividends or when rebalancing is huge over decades. For example, I bought some TSLA in my Roth back in 2019 and have been able to trim and rebalance as it grew without any tax consequences. In a taxable account, each of those rebalancing moves would have triggered capital gains. IMO any investment that you think has 8%+ annual return potential is a good candidate for the Roth, especially if it might require occasional rebalancing. The math just works better over time.

Has anyone else had issues with custodians allowing crypto in Roth IRAs? I tried to set this up last year and ran into tons of restrictions. Most major brokerages don't offer direct crypto investing in IRAs.

Great question about risk thresholds! From a tax optimization perspective, I'd say any investment you expect to outperform bonds (so roughly 6-8%+ annually) becomes a stronger candidate for Roth placement, especially if it's volatile. The key insight is that Roth IRAs eliminate the tax drag on compound growth. Even your 10x crypto example over 35 years would only be about 6.9% annualized - but in a taxable account, you'd face capital gains taxes that could reduce your effective return by 15-20% or more. In the Roth, you keep 100% of those gains. I'd prioritize Roth placement for: 1) High-growth stocks with minimal dividends, 2) Small-cap or emerging market funds, 3) Sector-specific ETFs (like tech or biotech), 4) Alternative investments like crypto or commodities, and 5) Any investment you might want to rebalance frequently. The beauty is you don't need to predict exact returns - just focus on putting your highest expected growth potential investments in the Roth, and you'll benefit from the tax-free compounding regardless of whether they hit 8% or 15% annually.