Three Advantages to Holding a Self-Directed IRA in a Volatile Market
It doesn’t matter what kind of investor you are: when you see volatility in the markets, it can be a little scary. You start second-guessing yourself. You start wondering about your retirement portfolio and having thoughts like “should I get out of stocks entirely?” This is especially true if you’re in possession of a Self-Directed IRA and have a high degree of control over your retirement funds.
The answer, of course, is not to panic in a volatile market, but to construct your portfolio in a way that you’re ready for market volatility and can weather the storm with confidence. One advantage to the Self-Directed IRA is that you’re free to create a portfolio of your choosing full of investments outside of the traditional stock market in order to feel good even in periods of volatility. But there are other advantages you might not have considered. And if you find yourself fretting over the market swings, try to remember that weathering the storm isn’t only about knowing the winds, but about having a strong position:
Advantage #1: A Self-Directed IRA Lets You Invest Outside the Stock Market
Is the stock market a good vehicle for long-term returns? Yes. No one denies that; all you have to do is look at the history of the Dow Jones Industrial Average or the S&P 500 to see that you can expect long-term growth.
But that doesn’t mean you should have all of your money in stocks. As the recent months have shown, the stock market is vulnerable to wild swings. If you have a long-term retirement plan, you can generally weather these swings with minimal damage. But if you have a short-term retirement investment plan, you’ll want a Self-Directed IRA that allows you to invest in other types of assets.
Advantage #2: Short-Term Investors Can Invest for Immediate Income
If you’re a short-term investor in that you’re looking to retire sooner rather than later, then you know that you have less tolerance to market swings; if the market goes down, you might not have the several years it can take for your investments to recover. And since you’ll need a retirement income sooner rather than later, it only makes sense that you choose investments that can yield that kind of return right away.
Real estate is one such investment, and many people armed with a Self-Directed IRA will use real estate in order to get their retirement income moving despite problems with the stock market. Because you can invest in real estate through an IRA, you can still realize the tax benefits of an IRA even while helping to ensure that your investments have a more immediate impact on your bottom line.
Advantage #3: Building a Stronger Portfolio
A Self-Directed IRA allows you a lot of control in customizing the makeup of your portfolio. If you want to create a portfolio that’s highly resistant to stock market fluctuations, then you’re free to do that. For example, you can hold precious metals within a Self-Directed IRA; precious metals are commonly seen as a good “hedge” against inflation or volatile stock market conditions.
A strong portfolio isn’t just a large one; it’s a portfolio that has some resilience to wild fluctuations in the markets. That means holding real assets like real estate and precious metals, to be sure, but it also requires that you take charge of your financial destiny and consciously create a portfolio capable of weathering these storms. If you’d like to learn more, be sure to keep reading here at AmericanIRA.com or call us at 1-866-7500-IRA(472).