A Roth IRA allows investors to save for the future without having to pay taxes on those gains or the income earned with the plan. This type of plan makes a great deal of sense for many investors, particularly those who fear that tax rates may not be so kind to them in the future when they plan on drawing on the investments. This leaves a couple of obvious questions that investors need to answer, least of which involves taxation.

The first question involves whether they want to simply earn a smaller amount of interest income. While this is tax free, this income would be small and not very helpful in achieving larger leaps in terms of plan value. The second question would involve achieving potentially higher levels of growth but at potentially considerably higher levels of risk. Sounds like a great plan, but the problem is that most people do not want to lose their IRA savings to crazy market gyrations like those seen during the 2008 year.

This is where mutual funds can help. Investors who want a steadier approach to growth in their investment portfolios will suffer less when they invest in mutual funds simply because these types of investments offer a great deal of diversification. What this means is that mutual funds typically do not invest in a single security like, say Microsoft. They will hold a wider range of securities so that if Microsoft has a really quarter and their stock price plummets, the other securities held within the fund should hopefully keep the fund in the black and continuing to grow (sometimes at the cost of a company like Microsoft in this illustration).

Of course, this is just an illustration and in many case when companies, whether it is Microsoft or any other big company, reports bad news that sees their stock plummet, many of the other securities in the portfolio also suffer because bad news is rarely isolated to a single security.

So how to mutual funds help in cases where the news is widespread across the whole market? In many cases, mutual funds cannot defy gravity -- when the pull is down, even well-diversified mutual funds will suffer. The benefit to a mutual fund lies, however, in its ability to pick the right type of securities to hold. So while the broader market might suffer due to poor economic figures, some of the securities within the mutual will keep it afloat because those securities are where people want to invest when the economy slows down; stocks like Proctor and Gamble, Colgate Palmolive, Utility companies that are all considered "defensive" securities because they will always be in be business because their products are staples to our personal lives.

In response to why mutual funds that offer growth are important to your IRA, consider the difference between, say, 2% interest per year and the growth that many of these funds, while volatile during periods of economic uncertainty, can offer. Clearly, the secret to achieving your financial goals comes down to growth, not the 2%.