What Kind of Economy is Best for Self Directed IRAs?
The economy. It’s a phrase you hear over and over during a presidential election, hearing various senators and governors and businessmen each promising a different way to “fix it.” It’s something you hear them talk about on the cable news shows over and over, as if the “economy” is some monolithic thing that can be easily measured, like a building. The truth is, if you’re considering Self Directed IRAs as part of your retirement portfolio, “the economy” shouldn’t really enter into your thinking, at least not in the short-term.
Why is that? Let’s break it down by two concerns: what the economy really is, and what kind of portfolio you might want to construct for your retirement nest egg. As you’ll find out, Self Directed IRAs can be great for building a portfolio that can withstand any kind of economy…but more on that later.
The Economy: Why a Self Directed IRA Can Help You Face Any Kind
Let’s talk about “the economy,” since everyone else seems to be doing the same.
“The economy” is generally what people refer to as the health of business and finance in the United States. Sure, there’s a global economy—and it does have an effect on how things work here at home—but for the most part, when people say “the economy,” they’re referring to the United States.
The economy is really just the collection of financial activity in a given country. It’s almost impossible to measure, but that doesn’t stop a lot of people wearing bow-ties and suits from trying anyway. To measure the health of the “economy,” many people look to the following variables:
- The stock market, or usually the Dow Jones Industrial Average. This is the “mainstream” view of the economy, and where many people recommend you put most of your money.
- Jobs numbers. A healthy economy will give lots of people high-paying jobs, which means people are constantly checking the jobs numbers to see how healthy the economy really is.
- Interest rates. This opens up a whole new can of worms, but many people judge the health of an economy by its interest rates, for better or worse.
Using Self Directed IRAs to Navigate an “Economy”
When the economy takes a downturn, it usually means that the indicators of choice—the stock market, jobs numbers, and the like—are also headed in the wrong direction. For people with all of their money in stocks, this is bad news. Even a well-diversified stock portfolio will suffer in times of economic hardship. The truth is, so will most investments.
But there’s more to an economy than just the stock market, and this is where Self Directed IRAs come in. Self Directed IRAs make it easy to invest in different types of assets, including precious metals and real estate, which means that your money isn’t quite as exposed to the troubles of a stock-based economy as portfolios with a heavier dose of stocks in their composition.
What does this mean for you? It means that you’ll want to protect yourself from any type of “economic” downturn by having your money in a wide range of asset classes. Diversifying your portfolio won’t necessarily help you to “escape” the economy—since you’re actually part of the economy—but it will help you to feel more secure about your assets even when the economy isn’t doing so well.
If you want to learn more about Self Directed IRAs, be sure to contact us at 1-866-7500-IRA(472) to learn more. You can also keep browsing our website here at AmericanIRA.com to learn more about economic and investing concepts.