Opportunity for Self-Directed IRAs as Investors Dial Down Risk

Self-Directed IRAsSelf-Directed IRA owners seize opportunity as investors all over the world are pulling in their horns.

Thanks to a recent correction on the part of the long-overheated Chinese stock market finally reminding the whole world that risk is always present, investors from Wall Street to Main Street are taking some money off the table in the biggest ‘flight to safety’ we’ve seen since 2008.

In 2008, we actually saw a situation where treasuries were bid up so high they actually had a negative interest rate for a while. We aren’t quite in negative interest rate territory yet but Treasury yields have been pushed below 2 percent for the first time since spring. Gold and silver are also up substantially as investors dump stocks for something a little more certain.

We aren’t anywhere close to that, but we are seeing a substantial flow out of what individual investors perceive as ‘risky’ assets, including mutual funds, towards safer assets. Those funds include bond funds as well as stock funds, indicating that the flight to safety is broader than we are accustomed to seeing in normal stock market adjustments.

The dislocation may mean there is opportunity for alert Self-Directed IRA owners to pick up assets at fire sale prices. After all, the more eager unsophisticated investors are to dump risky assets and migrate to safety, the more attractive the price they will sell at.

Advantage: The Self-Directed IRA owner with patience, a tolerance for risk, and a long time horizon. Those with no stomach for risk will sell off what they can and try to buy treasuries and fixed annuities. Indeed, the LIMRA Secure Retirement Institute reports that annuity sales in the 2nd quarter were up 10 percent over the first quarter. Those who have time and patience will be able to pick up closely held businesses, stocks, venture capital, private equity, speculative real estate and other investments perceived as risky.

chinese_yuan_falling_800_wht_5173Interested in Chinese stocks? The Chinese government likely is. After the Shanghai index fell nearly 12 percent in August, major buying activity pushed the Chinese index back up by 5 percent.

Uncertainty favors the bold, and as a bearish sentiment takes hold, Self-Directed IRA owners may be able to pick up bargains in the following areas:

  • Small businesses – as current owners look to lock in a price in order to retire.
  • Master limited partnerships, which are often perceived as risky.
  • International investing, as investors seek haven in developed markets.
  • Equities

Meanwhile, the flight to safety could generate tactical trading opportunities for those who currently own assets in high demand by risk-averse investors:

  • Short term treasuries
  • Agency debt
  • High-grade bonds
  • Gold and precious metals
  • Real estate
  • Defensive stocks

If you’ve been sitting on assets that have made a substantial run up recently amidst slowdown fears, now may be the time to unload some of them. Conversely, if you’ve been looking for some opportunities to bring some risk exposure to your portfolio at a relative bargain price, now may be the time to make an offer to some nervous sellers. The contrarian investor is usually the one who benefits at market inflection points!

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Need help with the transactions? Do you want to open an IRA or 401(k) account flexible enough to handle all of the self-directed strategies available to you? American IRA, LLC can help. We are among the nations’ leading experts on self-directed retirement investment strategies. Call us today at 866-7500-IRA(472), or visit us at www.americanira.com.

We look forward to hearing from you.










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