Many investors who use a Self-Directed IRA do it to diversify their assets and get themselves out of the market. But what if you wanted to hold alternative assets in your retirement account without necessarily separating yourself from the market entirely? Are there some investments that “feel” like stocks?
Real Estate in a Self-Directed IRA
When the real estate world blew up before the Great Recession, it showed just how often real estate and the stock market can go hand-in-hand. Check on your local real estate markets on Zillow these days and you will often find that real estate is often a seller’s market, echoing what’s going on in the stock market.
A look at the price inflation for housing since 1967 shows that residential real estate has enjoyed a relatively peaceful, expansive increase in prices since those turbulent times. It echoes what’s happened in the stock market, which has inched up over the years until it started breaking new records. This is not to say that real estate and the market will always coincide—because they won’t—but when the economy does well, both sectors tend to follow.
Holding Foreign Currencies in a Self-Directed IRA
We should note that investing in foreign currencies can be risky and speculative. Unlike an investment in a share of stock, which might yield you dividends, investing in a foreign currency is a bit like investing in a single stock with no guarantee of return. You may even find that the value of your currency dwindles against the dollar.
However, a proper foreign currency strategy can make sense within a retirement plan. Like any investment, it requires skill and forethought before plunging in head-first.
Why foreign currencies? Foreign currencies allow you to put your money where your mouth is regarding the future of some nations’ economies. It also helps you diversify your assets out of one single currency and provides international exposure that provides a wider safety net. You might also consider holding exchange-traded funds that are designed to follow the success of a country’s stock market while providing you with a wider portfolio.
How do you invest in foreign currencies? There are a number of ways:
- Foreign CDs—certificates of deposit.
- Investing in the stocks of multinational or companies with foreign headquarters.
- Using ETFs to “bet” on a specific country’s economy.
Investing in Private Lending
When the stock market does well, it tends to mean the whole country’s economy is doing well—in broad strokes. That tends to make private lending a less risky venture, which in turn suggests that broad private lending will tend to follow the stock market. As was the case with real estate, this won’t always be a 1:1 correlation. And any individual loan you make is like an individual bet in the stock market—anything can happen.
However, if you want to broaden your assets when you believe the economy is going to grow, using private lending within a Self-Directed IRA is one way to bet on a good economy.
Are we joking? Did we really not read our own headline? Naturally, we understand that stocks will tend to echo the stock market—but keep in mind that one of the benefits of a Self-Directed IRA is the freedom you will enjoy when you use one. Rather than be restricted to a specific company’s plan and limited mutual fund options, directing your own IRA means having the power to pick and choose your own investments.