There is no doubt that the COVID pandemic has changed the way we interact with the world. But with the way many people invest these days, investing can be as simple as a few clicks—or faxing paperwork. That means that investing can be done remotely. So, given that fact, how has COVID-19 changed the way people invest? It goes beyond how people literally invest. For a Self-Directed IRA investor who is looking to build retirement wealth, understanding what COVID has done to our collective psychology can be an important way to research. It tells us a lot about the state of the world.
Diversification: A Growing Trend?
An article in Seeking Alpha pointed out that diversification may be a growing trend in the wake of this crisis. The argument? Investors had been chasing riskier and riskier assets to find the returns they were after. But in the wake of COVID, which showed just how quickly the stock market can change and potentially rattled investors, it is clear that some investors may see the need for diversification.
Diversification across multiple asset classes and even within asset classes can give investors more confidence. For example, an investor who holds 100% stock has to rely on the stock market indexes to know how their retirement is doing. And should they retire in a down year, it may affect their decision-making process. They may even need to postpone retirement. Stocks have traditionally offered high gains over time, but no investment comes with any short-term guarantees.
Diversification helps stem this issue by giving an investor’s portfolio more overall protection and stability. By broadening investments, some investors are able to shift focus.
Real Estate Investing in a Pandemic
Real estate investing is still going on. In fact, real estate prices in many regions are even higher than when the pandemic began. Reports of the demise of real estate, it appears, were greatly exaggerated.
But that does not mean that there aren’t realities to how real estate investment works in a pandemic. The good news for Self-Directed IRA investors is that it can be a fairly intuitive experience. After all, Self-Directed IRA investors who put money into real estate know that they have to keep their investment properties separate from their personal assets. This separation might make it more intuitive to work with real estate in a world where social distancing is encouraged.
As for the trends in real estate, there is the possibility that restrictions in supply have kept prices moving up. If fewer homeowners are listing their homes for sale, then in many cases, it may remain a seller’s market. This is something for Self-Directed IRA investors to consider, especially those who are careful to include home inspection contingencies into purchase agreements. When sellers have more power, they are free to choose from offers that don’t contain these contingencies.
Where are the Trends Headed?
The truth is the future is impossible to predict. There may be some obvious emerging trends that come about as a result of the COVID pandemic. But it does not mean all of the trends will turn out that way. That is why so many investors seek out portfolio diversification with a Self-Directed IRA. Diversifying out of traditional retirement assets like stocks and bonds is easy through a Self-Directed IRA. However, it might not be intuitive at first. That is why we here at American IRA include information about Self-Directed IRAs and what they can do.