Shaky Stock Market Underscores Need for Diversification and Self-Directed IRAs

Self-Directed IRAOne of the biggest and best reasons investors choose a Self-Directed IRA for at least a portion of their retirement assets is the need for diversification.

Most of us understand equities, and it is true, like the little girl in the nursery tale, when they are good, they are very, very good, but when they are bad they are horrid.

As of this writing, the Dow Jones Industrial Average has pulled back about 280 points in the last day, and has made investors no money in the first quarter of the year.

Self-Directed IRAEquity investors can’t complain much – the drop comes after a long bull run since 2009, going on six years. But “corrections” and “pullbacks” aren’t much fun for those whose portfolios depend on continued gains in the stock market – gains that from this point have to come on top of a quite mature bull market, historically low dividends, and ever expanding earnings multiples. The latter is a risky bet at any time.

Why the pullback? As usual, blame Greece. The ancient country – which at one point was apparently home to some smart people – is staggering under the load of a huge foreign debt and a stagnant economy. Tax collection is a problem as much of the economy has gone underground and the wealthy are scurrying to move assets offshore. The country is having trouble repaying its foreign debt, and having trouble telling its people that the party is over. If Greece defaults, the resulting write-offs would send shock waves through the European economy – already slowing down – that would make themselves keenly felt here in the United States.

Self-Directed IRAIn the event of a major default, the bond market won’t provide much shelter from a decline in stocks. After all, it would be bonds that the Greek government is defaulting on in the first place! With interest rates on bonds still extremely low, bond prices are conversely extremely high. Economics 101: Bond prices and interest rates move inversely to one another. If governments decide to inflate their way out of the crisis – as they have many times before – all paper assets are at some risk.

Self-Directed IRAs and Diversification

Don’t rely on run-of-the-mill investment companies to help you meaningfully diversify. Their idea of ‘diversification’ is often helping you spread your assets between many different varieties of paper.

A Self-Directed IRA, on the other hand, allows you to move beyond paper assets and actually hold a direct interest in various kinds of hard, tangible assets:

  • Precious metalsSelf-Directed IRA
  • Gold and silver coins and bullion
  • Rental properties
  • Commercial and residential real estate
  • Raw land
  • Farms and ranches
  • Tax liens and certificates tied to a specific and identifiable property
  • A consulting business
  • Leveraged real estate

… and much more.

Benefits of Self-Directed IRAs

As long as you avoid life insurance, jewelry and gemstones, art and collectibles and alcoholic beverages, you can own nearly anything you like as an asset within a Self-Directed IRA. Any of these asset classes can help provide the following benefits:

  • Meaningful diversification away from the stock market
  • Some protection against inflation
  • Competitive returns
  • Access to leverage or borrowing to invest

[tweetthis twitter_handles=”@iraexpert” hidden_hashtags=”#SelfDirectedIRA”]Investors choose Self-Directed IRAs for diversification [/tweetthis]

And, of course, the usual benefits we associate with IRAs and other forms of retirement investing: Tax deferral (or tax-free growth in the case of Roth accounts) and asset protection.

American IRA, LLC specializes in self-directed retirement strategies and we are among the nation’s leading experts in Self-Directed IRA and alternative investment planning. For more information, visit us at, or call us at 866-7500-IRA(472).




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