Roth IRA

Thoughts on holding Company bonds inside a Roth?

The interest payments collect in the Roth and are tax free when you take distributions according to the rules after age 59-1/2.

In good times, you will get better returns in equities. But holding bonds (not bond funds) in a Roth is fine–especially during current market turmoil. A laddered maturity bond portfolio might be the best approach. The maturing bonds can be replaced at higher interest rates. So you tend to get an average return and it lags a bit but tracks market rates.

One day in this cycle interest rates will peak. The ideal is to lock in that interest rate for as long as you can.

Otherwise, rates are low now and likely to rise. That favors short bonds (or CDs) so they can be replaced later at higher rates.

CDs are safest in that they are insured by FDIC. But investment grade corporate bonds (rated BBB or better) should be ok. (Arindam on the Fixed Incomes board is the expert. He thinks BBB is too risky for many.) Certainly avoid junk bonds. In times of recession they can default.