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However you do the IRA route, you will be paying tax at ordinary income rates. With an index fund you will only be paying LTGC tax rate.

No, this is not correct. The OP is talking about making a non-deductible contribution to a Traditional IRA, and then converting immediately to a Roth. So the money has already been taxed at ordinary income rates, and all earnings in the Roth would be tax-free. If the OP were to put that already-taxed money into a long term buy-and-hold vehicle in a taxable account instead as you suggest, then the earnings would be taxed at LTCG rates vs. not being taxed at all if in the Roth.

The gotcha is that the OP cannot already have a Traditional IRA since then the pro-rata rules come into effect, but I read it as though the OP does not have that type of account already. That's the key in her position.
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