Between the coming elections and the host of tax provisions that are set to expire at the end of the year, investors are feeling a lot of uncertainty right now. But there's one thing you can be certain of: A great deal is coming to an end in a little over two months, and missing out could be a huge mistake.

A year-long opportunity
When 2010 began, high-income investors who'd never before had a chance to use Roth IRAs suddenly got their chance. Although they still can't make direct Roth IRA contributions, the removal of income limits on Roth conversions gave anyone who had a traditional IRA a back door into a Roth.

Nevertheless, not everyone has done a Roth conversion. The drawback for converting is that you have to include the amount you convert in your taxable income, and pay the resulting income tax. If you expect to be in a lower tax bracket after you retire, then paying more tax now doesn't really make sense. In addition, some believe that Congress could take away the benefits of Roth IRAs in the future, essentially forcing those who converted to pay tax twice.

Addressing the critics
You'll still be able to convert your Roth in 2011 and beyond, under current law. But what turns a good deal into a great one is that this year only, you have an option to spread out the tax liability from the conversion. Most of the time, you include the converted amount in the tax year of the conversion. For 2010, though, you can instead elect to include that income in 2011 and 2012, giving you as much as two extra years to pay part of the tax.

The most valuable aspect of Roth conversions is that you can undo them if they don't go well. The ability to recharacterize your conversion anytime between now and next Oct. 15 gives you nearly a year to see how things go before you have to make a final decision.

Taking full advantage
In fact, the recharacterization provisions give you a chance to turn your new Roth into a no-lose proposition. By creating separate Roth IRAs and putting different investments in each, you can recharacterize the ones that do badly and keep the ones that have big gains. Pick the right investments, and you can essentially guarantee success.

One obvious choice would be to use inverse ETFs. For instance, if you put half your money into SPDR Trust and the other half into the corresponding inverse Short S&P 500 ProShares (NYSE: SH), you'd theoretically be certain of having one go up and the other go down. The net return would be zero, but recharacterizing would give you the benefit of tax-free income on one account, while reducing the eventual tax bill on the losing portion that would go back into your regular IRA.

The safer choice
Inverse ETFs, however, have problems. More importantly, such an obvious strategy might raise concerns at the IRS. Another choice, though, is to pick investments that are uncorrelated with each other. Such investments are less likely to rise and fall in tandem, giving you a better chance of seeing divergent results.

For instance, according to Standard and Poor's, utility stock returns are almost completely uncorrelated with returns on financial stocks. So here's a possible strategy after you convert and divide your assets into two Roth accounts:

  • In one Roth IRA, buy US Bancorp (NYSE: USB), Hartford Financial (NYSE: HIG), and E*TRADE Financial (Nasdaq: ETFC). All three of these companies are components of the S&P's financial sector, and the picks cover banking, insurance, and brokerage services, giving you a diversified mini-portfolio of financial stocks.
  • In the other, choose utilities National Grid (NYSE: NGG), Exelon (NYSE: EXC), and Aqua America (NYSE: WTR). This diversified portfolio gives you broad exposure to gas, electricity, and water utility businesses, and each has a strong dividend.
  • Pay your estimated taxes next April, but file an extension until October.
  • Before next Oct. 15, look at how your accounts have done. If one or both has gone down, recharacterize it. If it's gone up, keep it and enjoy the tax-free growth.

Of course, ideally, you want to pick investments that will all go up. But the option to recharacterize protects you from suffering a big tax hit if things go wrong. In addition, it lets you postpone deciding whether to include income in 2010 or to wait, depending on what Congress does with tax rates between now and next October. 

Don't wait
Since you can change your mind any time in the next year, there's no downside risk to converting. The chance at tax-free growth, however, makes it well worth the attempt.

Once you have a Roth, you need to know what stocks to buy in it. Click here for great dividend stock ideas in the Fool's special report, "13 High-Yielding Stocks to Buy Today."

National Grid and Aqua America are Motley Fool Income Investor selections. The Fool owns shares of Exelon, which is a Motley Fool Inside Value selection. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Dan Caplinger doesn't like to lose. He doesn't own shares of the companies mentioned in this article. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy is a win-win for everyone.