We know that a Self-Directed IRA makes it possible to invest in alternative asset classes that many people do not typically associate with retirement accounts. Real estate. Precious metals. Single-Member LLCs. These investment assets make it possible for Self-Directed IRA investors to move outside of the typical investments and build wealth with a “wider” portfolio, which can help them create a peaceful portfolio even in uncertain times.
Recent headlines in the U.S. have seen all sorts of volatility. A pandemic. Political upheaval. Financial burdens placed on the poorest Americans. Given all that is in front of us, is a Self-Directed IRA an ideal investment vehicle for volatile times? Here are some things to consider.
Volatility in the Stock Market
When the COVID-19 pandemic hit, stock markets began a slide of unprecedented scale. They eventually recovered. But that volatility showed one thing: that it is important for investors who believe in the value of diversification to think about what that means going forward.
An investor can use a Self-Directed IRA to add more diversification to a retirement portfolio. This, in turn, means the investor is free to choose from a wide variety of asset classes that can add stability. In retirement investing, psychology is very important. And investors who take that into account by adding a Self-Directed IRA when constructing a portfolio can potentially weather the storm of stock market volatility.
Volatility in the Political Realm
The start to 2021 has been incredibly volatile, and there is no surprise that investors are looking for ways to add some certainty to their retirement portfolio. After all, it is hard to rely on long-term returns when you are unsure about the political environment directly ahead. The good news is that a Self-Directed IRA makes it possible to invest in alternative asset classes, which in turn can help an investor spread wealth across different “buckets” of retirement asset classes. However, it is important to keep in mind that you are in charge of your own portfolio. If you want to go 100% in one type of asset, that is also a possibility.
That is one reason that investors will want to think through their retirement strategy to begin with. They have to understand what their primary goals are as an investor. A Self-Directed IRA is a powerful way to begin diversifying, but it is up to the individual decisions of the investor to carry out a diversification plan with their portfolio. Political volatility or not, the responsibility of your portfolio ultimately falls on you.
Volatility in the Future
Let us be honest. Retirement investing is not always about what is happening at the present moment. It is about looking forward—as much as ten, twenty, thirty, or even forty years. For investors who want to build a sizeable nest egg for retirement, the best way to do it is to use the power of compounding returns. This is the exponential growth of assets that occurs over the long term.
A Self-Directed IRA is no guarantee of future success. It is simply a vehicle through which an investor can exercise more personal choice in what they include in their retirement portfolio. With a Self-Directed IRA, the possibility of adding real estate assets, precious metals, and other non-stock market investments can broaden the scope of a portfolio, giving an investor a sense of hedging against volatility. But ultimately, it is up to what the individual investor does—and the consistency with which they apply their investment wisdom—that makes for a successful retirement. And for many investors, that means looking forward to an investment plan of multiple decades.