A Roth IRA is an individual retirement account (IRA) allowed under the tax law of the United States. A Roth IRA differs in several significant ways from other IRAs.

Established in 1998, a Roth IRA can invest in securities, usually common stocks or mutual funds. Other investments, including derivatives, notes, certificates of deposit, and real estate, are possible.

Establishing your IRA can be a simple as walking into a bank or brokerage office, filling out a few forms and writing a check. You can also set up an IRA over the Internet if the provider you prefer does business that way.

Before you settle on a particular provider, ask about the fees that will apply to your account. There may be startup fees, annual maintenance fees, fees for changing your investments or withdrawing your money. These fees can have a significant impact on the investment performance of your IRA. It's especially important to know what would be involved if you decide you want to transfer your account to another provider.

Depending on with whom a Roth IRA is set up, it can be managed in creative ways, including investments in non-typical assets. It's easy to find an IRA provider. But which one is best for you?

Providers include trust companies, savings and loans, and credit unions as well as commercial banks. They often accept relatively small accounts and may charge minimal fees or no fee at all, making them an attractive choice for people who want to start out small. However, a bank isn't likely to offer as many investment alternatives as a mutual fund or brokerage firm.

Mutual funds can provide a wide range of investments. You may be able to invest parts of your IRA in different types of funds, achieving the mix that's right for you. Some mutual funds make it easy to shift some or all of your IRA from one fund to another when your investment objectives change. Many investors will find that this is the best choice.

Many brokerage firms offer IRA accounts. These are often called self-directed IRAs because they give you the ability to make specific investments for your IRA. Many brokers make it possible to own mutual fund shares as well as individual stocks.

Insurance companies provide IRAs too. This choice may be appealing if you want to invest your IRA in an annuity or you find some other investment offering of the insurance company attractive.

The best type of investment for your Roth IRA depends on various factors: the size of your Roth IRA, the time frame for your investment, your other investments and your investing style.

The tax law doesn't set a minimum size for a Roth IRA, but providers generally set minimum account sizes. Some providers may not accept your account because it's too small. In any event, it makes sense to start small and choose a simple investment that won't incur a lot of fees or require a lot of attention. You can get elaborate after you've built your IRA to a larger size.

Consider the time frame of your investment. When investing for the long term it makes sense to take some risk to obtain higher rewards. If the risk produces losses, you should have plenty of time to recover. Short term investors need to put more emphasis on asset protection.

If you have other investments, for instance a brokerage account or a 401(k) account, consider whether your IRA can be invested in a way that provides more balance to your overall portfolio. Another consideration is the allocation of assets between taxable accounts and non-taxable accounts.

Choose an investing style you're comfortable with. Some are willing to risk losses in order to have a shot at higher gains. Others are willing to accept a lower return for a sense of security. Investing style affects your choices in many ways. Some types of investments do not need frequent attention as others. Your investing style will depend on how much time and effort you want to put into your IRA investments.