Ask any old investor what diversification is and you’ll probably get some sort of variation of a single answer: “It’s about the different types of stocks you have.” After all, picking stocks is hard, so if you want a portfolio that reflects the value of the stock market over time, you’ll buy lots of different stocks and funds. But what if you didn’t just mean diversification within the stock market, but diversification as an investor as a whole? What if you wanted to achieve true diversification with a Self Directed IRA?
“You don’t need a Self Directed IRA,” many people will likely tell you. “Putting your money in stocks is safe so long as you’re diversified.”
Tell that to all of the soon-to-be-retirees who were so worried about their stocks back in ’08 that they pulled lots of their money out of the market.
If you want real financial security—not just fake financial security that relies on the stock market system already in place—then it’s time to think about using a Self Directed IRA. Here’s what a Self Directed IRA can teach you about what real diversification means:
A Self Directed IRA Helps You Diversify Asset Classes
It’s not enough to buy small-cap and mid-cap version so the same exact type of investment (stocks, I this case). If you really want true portfolio diversification, that means buying different types of investments. A truly diversified portfolio will include stocks, funds, precious metals, stakes in private companies, real estate, and maybe even more. That’s what helps you achieve real peace of mind: knowing that your investments aren’t tied to the performance of one particular market.
If you want to do that with the protection of a retirement account, then you’re going to have to learn what the Self Directed IRA is all about. As it turns out, the IRS actually gives you a tremendous amount of leeway when it comes to investing in assets via retirement accounts: you can use a retirement account to invest in the aforementioned assets, including precious metals and real estate.
A Self Directed IRA Encourages Self-Reliance and Portfolio Participation
What is portfolio participation? It’s the idea that you’re not only going to rely on some “expert” to do the picking for all of your investments, but that you’re going to actually take a direct role in selecting the makeup of your retirement portfolio.
It doesn’t mean that you have to constantly check up on your portfolio, or even work that hard at it; it just means that you’re going to take a more ambitious role in your financial destiny than merely hoping for the best.
By investing in assets like real estate, you can then use your own investing skills to identify the best investments; if you don’t believe you have those skills, you can focus on a different area of assets with which you’re more comfortable, such as precious metals or private company holdings. The truth is, there’s enough freedom out there that you can use retirement account protections on a number of different investments.
Along the way, you’ll learn that it’s not just the stock market that determines your financial success; it’s the quality and strength of a whole range of investments. You can even keep a large chunk or a majority of your investment portfolio in stocks and bonds! Diversification is all about spreading it around and not picking one market as a winner over another.
If you want to learn more about what the Self Directed IRA is and what it can do for you, keep reading our articles here at AmericanIRA.com or call us at 1-866-7500-IRA(472).