IRA Conversion to ROTH: which is better to convert 1st, stock or mutual funds?

Submitted by Dee Totten on Thu, 2022-12-08 20:12

Hello: For an IRA conversion to a Roth, which is better to convert 1st as available, stock or mutual funds?
Thx, D

Permalink Submitted by Alan - IRA critic on Thu, 2022-12-08 20:42

Either one. You should look at the specific stock or fund and determine which holding you expect to grow the most if you intend to hold them long term, then convert that one. Of course, since you can sell any holding and purchase another in your Roth IRA without tax consequences, it really does not matter what you actually convert since you can correct at anytime by selling the investment and purchasing another.
Most stocks are riskier than the average mutual fund, and subject to more dramatic swings in value because they are not diversified. Mutual funds have hundreds or thousands of different holdings, so the risk is lower. You might also consider ETFs as a substitute for mutual funds.