Good Roth IRA investments

Screening Filters

1. Market Cap ≥ $10B (market_cap: {'min': '10000000000'})

   • Purpose: Focus on large, established companies rather than small, speculative names.
   • Rationale:
     • A Roth IRA is a long-term retirement vehicle, so stability, durability, and survivability across cycles matter.
     • Large-cap companies typically have:
       • More diversified revenue streams
       • Better access to capital
       • Greater resilience in recessions
     • This reduces the likelihood that a position in your retirement account goes to zero due to business fragility.

2. Index Components Only (is_index_component: ['GSPC', 'NDX'])

   • Purpose: Limit the universe to companies in the S&P 500 (GSPC) and Nasdaq 100 (NDX).
   • Rationale:
     • S&P 500 and Nasdaq 100 constituents are generally:
       • Among the largest and most followed companies
       • Subject to index inclusion criteria (profitability, size, liquidity, etc.)
     • This helps:
       • Filter out low-quality or very niche stocks
       • Keep you in a universe that many retirement-oriented funds already use as a core building block.

3. Major U.S. Exchanges Only (list_exchange: ['XNYS', 'XNAS', 'XASE'])

   • Purpose: Restrict to stocks listed on NYSE, NASDAQ, and AMEX.
   • Rationale:
     • These are the primary, most liquid U.S. exchanges.
     • Benefits for a Roth IRA:
       • Better liquidity (easier entry/exit, narrower bid–ask spreads)
       • Stronger regulatory oversight and reporting standards
       • Typically higher transparency and analyst coverage
     • This lowers operational and liquidity risk in a long-term retirement portfolio.

4. Debt-to-Equity ≤ 1 (debt_equity: {'max': '1'})

   • Purpose: Screen for companies with moderate or lower leverage.
   • Rationale:
     • High debt can become a serious problem in downturns or when interest rates rise.
     • For a Roth IRA you want:
       • Businesses that can survive recessions without needing dilutive equity raises or risking insolvency
       • More predictable cash flows that can be reinvested for growth or returned to shareholders
     • A cap at 1 keeps you away from companies whose balance sheets are highly stretched, reducing long-term financial risk.

5. 5-Year EPS CAGR ≥ 8% (eps_5yr_cagr: {'min': '8'})

   • Purpose: Require a history of solid earnings growth.
   • Rationale:
     • Roth IRAs work best when you let compounding do the heavy lifting over decades.
     • Companies that have grown earnings at least ~8% annually over the last 5 years:
       • Are demonstrating real business momentum
       • Have a better chance (not a guarantee) of delivering capital appreciation over time
     • 8%+ growth is meaningfully above inflation and roughly in the ballpark of long-term equity return assumptions, aligning with retirement-growth goals.

6. P/E (TTM) Between 10 and 40 (pe_ttm: {'min': '10', 'max': '40'})

   • Purpose: Target stocks with reasonable valuations—neither extremely cheap nor extremely expensive.
   • Rationale:
     • P/E < 10 can flag very cheap stocks, but often because:
       • The market expects earnings to deteriorate, or
       • There are significant risks or one-off factors
     • P/E > 40 can indicate:
       • Very high expectations priced in
       • Higher downside risk if growth slows
     • For a Roth IRA, where you want durable, compounding returns:
       • This range biases toward “quality at a reasonable price” instead of deep-value turnarounds or speculative, hyper-growth names.

Why Results Match the Roth IRA Goal

• The filters emphasize large, established, index-quality companies with:
  • Solid balance sheets (low–moderate leverage)
  • Proven earnings growth
  • Valuations that are not at speculative extremes
• This profile is well-suited to a long-term, tax-advantaged retirement account, where the priority is:
  • Compounding steadily over many years
  • Avoiding blow-ups and excessive volatility
  • Owning businesses that can survive multiple economic cycles
• By restricting to major U.S. exchanges and key indices (S&P 500, Nasdaq 100), the screen stays focused on stocks that are commonly used as core holdings in retirement portfolios, rather than speculative bets.