Recently, the news in the stock market has been a spectacular decline for technology stocks. For many people—especially those heavily invested in stock funds—this can be an alarming turn of events. The problem is that the stock market is heavily weighted towards many of the “blue” chip tech stocks, which means that even savvy retirement investors may be less diversified than they imagine. But is a Self-Directed IRA the ideal vehicle for offering more diversification?

It depends on what investors are looking for when it comes to diversification. For example, an investor might be in 100% stocks, looking to diversify within the stock market so that all of their eggs aren’t in a single stock’s basket. Or an investor may look to diversify with different asset classes outside of the stock market, investing in assets like real estate, bonds, and even private companies.

The truth is that a Self-Directed IRA can offer diversification on both levels:

• Diversification out of the stock market. You can own a general brokerage account, sure. But you can also use a Self-Directed IRA for investing in real estate assets, for example. This gives you access to retirement accounts that help you build a more diversified retirement strategy even outside of the stock market. A Self-Directed IRA means you do not have a limited amount of options because of using an employer-based plan.
• Diversification within a Self-Directed IRA. As we’ve noted previously, the short answer to whether investors can use multiple investments in a Self-Directed IRA is But it is not just multiple investments to think about, but multiple types of investments. And the answer there is the same: an IRA can indeed hold multiple types of investments, just as a brokerage account can hold both stocks and bond funds.

With that in mind, the answer is yes: A Self-Directed IRA can offer diversification. But let us look more closely at the asset types available to retirement investors to see what kind of diversification is available.

What Can You Own in a Self-Directed IRA?

Many people turn to a Self-Directed IRA when they want to hold real estate within a retirement account. This is one of the most popular “alternative” asset classes for retirement investors. However, owning a Self-Directed IRA does open more options than just real estate. In fact, even within the single umbrella of real estate, there may be multiple types available. That includes raw land, multi-family homes, apartment buildings, and commercial real estate. Single family rentals are also a real estate investment that could fit within a Self-Directed IRA.

Beyond real estate, investors can also turn to a number of other asset types. A popular option is that of precious metals. Investors use precious metals within a retirement account because they believe it will hedge against inflation—as the value of the dollar declines, the price of gold, which is denominated in dollars, tends to increase. Like real estate, this offers a way for investors to hold on to purchasing power even when inflation is rampant.

Investors may also turn to other assets like private companies, tax liens, and even private loans within a Self-Directed IRA. These all offer investors the ability to diversify out of the stock market and create a “wider” portfolio that is not subject to the whims of Wall Street traders on any particular day. But it is also important for investors to realize that when the power is in their own hands, they have to be selective about which investments they get involved in.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at www.AmericanIRA.com.