In the long run, stocks have a comparatively high return on investment. But that’s compared to bonds and CDs and other less volatile asset classes. One of the advantages of a Self-Directed IRA is that it opens up your options to a lot investments beyond the asset classes that Wall Street companies are pushing – that is, the ones that generate fat commissions and assets under management (AUM) fees for their own managers, brokers and advisors.
This week, the S&P 500 moved into positive territory for the year in a bull market that appears to be getting pretty long in the tooth. As any experienced Self-Directed IRA investor knows, the U.S. stock market could fall by 20, 30, 40 percent or more very quickly, at any time. Can your portfolio withstand the risk?
Here are some ideas that may help you weather any market storms on the horizon.
Rental real estate. Historically, real estate moves very differently than stock prices. Markets are local, rather than global. And even where prices are falling, rental real estate kicks off a steady stream of income that can be an important stabilizer – particularly for those who need cash flow to meet living expenses or to execute their investment strategy.
Rental real estate is also ideal for leveraged strategies that can help you increase your individual return on invested assets. And yes, you can have your IRA or other self-directed retirement account borrow money to invest – especially in real estate. But be mindful of the increased level of risk that come with leverage, as well.
Gold and Precious Metals
Gold, silver, platinum and copper are all hedges against economic declines and collapses that have stood the test of time. And with a Self-Directed IRA or other type of retirement account, you can take a direct position in gold or any of these other precious metals.
The catch: You can’t take personal possession of gold and silver or any other precious metal held directly by your IRA or other self-directed retirement account. You also can’t hold jewelry or gems in your Self-Directed IRA. Rather you must hold certain forms of bullion or coins that meet minimum legal standards for purity. For more information, download our exclusive guide to gold and precious metal IRAs, available at www.americanIRA.com.
Tax Liens and Tax Certificates. If a homeowner fails to pay required property taxes, many cities and municipalities will allow investors to pay the property tax on their behalf. In exchange, the investor has a lien on the home until the homeowner pays the investor back the money he or she paid in taxes on the owner’s behalf. Meanwhile, the home cannot be sold unless the lien is satisfied – plus interest. The interest rate is normally far superior to rates offered in other income-oriented investments, and the loan you make to the homeowners by paying their property taxes is secured by plenty of collateral, in most cases. After a certain amount of time, the investor can foreclose on the home – occasionally receiving a windfall of a home for a fraction of the market rate.
Historically, however, the loans are eventually repaid with interest, as homeowners are loath to lose homes because of such relatively small unpaid tax bills.
You can take advantage of these programs using a Self-Directed IRA or other retirement account.
Cash flows are not regular or predictable, as they are with bond portfolios or even with rental real estate. However, they are not correlated with the stock market, historically.
All three of these asset classes can help you achieve above-market returns – especially with the skillful use of leverage – while helping you reduce your exposure to stock market risk.
American IRA, LLC is among America’s foremost authorities in providing administrative services to owners of Self-Directed IRAs who are attracted to outside-the-box investment ideas, and who want to increase their diversification without necessarily sacrificing potential investment returns.
We have offices in Charlotte and Asheville, North Carolina, but we serve clients all over the country. Call us today at 866-7500-IRA (472), or visit our website, www.americanIRA.com, and see our vast library of informational articles and resources.
We look forward to serving you.