Scott Bishop, CPA, PFS, CFP®
STA Wealth Management, LLC, Houston, TX
For investors who want to use complex investing strategies, ETFs are sometimes the only way to access such strategies in a Roth IRA. For instance, selling stocks short in a Roth IRA isn’t typically allowed. However, you can buy ETFs that are designed to move in the opposite direction as a stock market index or other benchmark. These inverse (or short) ETFs give you similar returns to short selling.
Also, Roth IRAs don’t allow you to trade on margin, so you can’t use your retirement account to make leveraged trades. You can, however, buy shares of leveraged ETFs that offer a multiple of the daily returns on a particular type of investment, which will give you many of the same return characteristics that buying a fund on margin would.