If you’ve already read Part I of this series, you know that diversification is one of the key strategies that investors use to mitigate risk and ensure that their portfolio continues to grow in spite of market volatility. You are also beginning to understand how Self-Directed IRAs fit in to a retirement diversification plan.
As such, you know that diversification is important for you. You know that it solves problems like having all of your eggs in one basket. The only question is, how do you actually apply the principles of diversification in your own investment life, and what are the tools that will help you to achieve those applications? As you might suspect, we have a suggestion or two—but not before we explain how to best apply the tools at your disposal. Let’s take a look at some of the best ways to follow through on this need for diversification and ensure that your retirement funds are truly secure.
Common Diversification Solutions in Action
Diversification isn’t achieved until you’ve put your investments into action. You might think you know what’s coming in the market…but if all of your money is sitting in a checking account, then all you’ve really invested in is pure liquidity. Real investors know that the key to making their money work for them is to put their money to work for them – and as soon as possible. Items like real estate (through a real estate investment in a Self-Directed IRA) can, however, add to your portfolio while diversifying it at the same time.
But what do investors usually do to put these solutions into action? Let’s look at some common ways:
- Going international. Many investors like domestic stocks, bonds, and funds just fine—but they don’t think that those are the only investments available to them. As such, they invest some of their money in more international stocks, which is usually done through a broker. It’s possible to get even more international by opening up accounts overseas, but that usually requires your physical presence and a lot of time to make sure all of the proper reporting is handled.
- Breaking out of the “stocks-and-funds” box. We’re just as big of believers in stocks and funds as anyone else—the market is a remarkably consistent way to make money. But that doesn’t mean it’s the only way to make money, and it’s certainly not enough diversification by itself. Self-Directed IRAs allow you to invest retirement money in other forms of assets, like real estate, gold, silver, private investments, and more.
- Mixing up the portfolio. Those who do stick with stocks and bonds know that they can’t put all of their eggs into one basket—or in this case, one fund or one company. You can have a number of mutual funds, index funds, and stocks in your portfolio to ensure that market volatility doesn’t threaten to derail you every single time you encounter a bear market.
Putting it All Together
If you’ve been paying close attention, you’ve noticed that a Self-Directed IRA is a great way to ensure that you can put money aside in different types of investments—investments that remove some eggs from a single basket so that you’re not worried about any one specific downturn in the economy. That’s because Self-Directed IRAs allow you to invest in wide-ranging opportunities, from real estate and precious metals to private companies and even royalties.
How do you get started? It’s actually simpler than you think. First, you’ll want to be sure that opening up a Self-Directed IRA makes sense within your specific set of strategies. Then you’ll want to call us up at 866-7500(472) to learn more. Diversification isn’t one thing you do; it’s an entire process of understanding how investments work and how to spread yourself out so as to maximize security.