2021 Update

COVID-19 continues to wrap itself around the American people, but in 2021 there is hope. With a vaccine already given to more than 100 million people, there’s a light at the end of the Coronavirus tunnel. And the vaccine, combined with masks, hand sanitizer, toilet paper, and good social distancing practices mean the pandemic may become something else this year, and that means hope.

President Biden and Congress are working on changes to student loan debt structures, retirement plans, taxes, and much more that can affect your finances. This means that now, more than ever, diversifying your retirement and financial portfolios are vital. Investments in stocks and bonds can be a good bet, but there are other areas out there where money flows, as well.

Stocks, bonds, mutual funds, these are considered pretty traditional. More alternative investments include cryptocurrency, real estate, and working vineyards. Getting your finances in order now is more important than in the past, due to civil unrest and political shenanigans.

2020 In Review

With the staggering number of deaths and infections due to COVID-19 in 2020 in the United States, it can be overwhelming to consider the financial impact as well. Although the Stock Market seems to be doing well, Main Street is suffering many impacts from lower foot traffic, state-ordered safety-necessary closures, and loss of life. How have so many business people and investors been able to survive and even thrive, though there have been challenges?

Diversification is the practice of spreading out your investing power over different opportunities. Stocks and bonds are fine, but broadening your reach can make for a more solid foundation in difficult times. A Solo 401(k) allows for real estate and cryptocurrency and more as possibilities.

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The coronavirus is affecting hundreds of millions of people worldwide. Over 100,000 people have contracted the virus and thousands have dies from it already. Global markets are crashing. Communities are being quarantined. Large events, including festivals and parades, have been canceled. The NCAA is not allowing fans at tournament games (Update: all conference tournaments have been canceled) and the NBA has suspended its season. On March 11, President Trump has banned incoming flights from Europe. Schools are deciding whether they need to close their doors for an extended period of time. Investors are worried about losing their savings. However, there’s a reason why our clients are financially prepared for such a catastrophic event. In the following, we’ll tell you why and how you can ensure your retirement savings don’t take a huge hit in the event of future upheaval.

Being Financially Prepared

Every time something happens around the world, the US economy is affected. Whether it’s a trade war with China, tensions with Iran, financial crisis in Greece or a deadly outbreak, Americans and their finances are affected. The best way to be financially prepared is to properly diversify yourself. If you are 100% invested in the stock market, which many people are, a crash may derail your retirement completely. You must consider other investment strategies. Here at IRA Financial, we strongly believe alternative asset investments are the way to go.

During times of tumult, stocks will plummet, however, alternatives, such as real estate and precious metals, tend to hold their value. In many cases, alternative assets will soar in difficult times. We’ve discussed previously how gold has risen in recent months. There’s no reason why everyone shouldn’t be at least partially invested in alternatives.

Yes, if everything you had was in stocks and mutual funds over the last couple of years, you’ve probably seen great returns. However, all bear markets come to an end. Thanks to the coronavirus, it looks that time has come. For example, the Dow Jones peaked at near 30,000 one month ago. As of this writing, it has sank to under 22,000! All the gains accumulated have been wiped out in a matter of a couple of weeks. Time to look at different asset classes!

How to Properly Diversify

Proper diversification is all about not having all your eggs in one basket (as the saying goes). Obviously, you can diversify your stock holdings by investing in different asset classes and mutual funds. However, that’s really not being diversified if all of your funds are in stocks. As we mentioned, the best way to diversify is by investing in non-traditional, or alternative, investments.

The only true way to diversify is through a self-directed retirement plan. For many people, that means a Self-Directed IRA. Moreover, if you are self-employed, there is another, conceivably better, option – the Solo 401(k). Whichever route you take, it will allow you to invest in just about anything you want. The only categories prohibited by the IRS are life insurance (limited options with a 401(k), most collectibles and any transactions with a disqualified person.

This means that just about all other investments are up for grabs, assuming your plan provider allows for them. Of course, not all providers are the same and you may need permission to make an alternative investment. However, there are many, like IRA Financial, that give you full control of your investment decisions. You never need custodial consent from us to invest your retirement funds.

What Our Clients Are Saying

We’ve spoken to a number of our clients to check in on their investments. Afterall, we consider them friends, and not just clients. For the most part, our clients are in good shape. A majority of them invest almost all of their retirement funds in real estate. Other popular investments include peer-to-peer loans, small businesses, metals and coins, and cryptocurrencies. Of course, there are some that have a large chunk invested in the market. Unfortunately, they are seeing big hits to their bottom lines.

It’s vital that you spread your funds across multiple investments. As an example, oil is something else that’s seeing drops in prices. Great for the consumer, not so great for those invested in them. Self-directing is the only true way to get proper diversity.

Before self-directing my IRA, I was 100% invested in stocks and bonds. Now, most of my holdings are in cash-flowing real estate. The Stock Market decline hasn’t affected my retirement in the least. I’m much more relaxed since I don’t need to stress it!

Issac, IRA Financial client

Being financially prepared starts with your retirement plan provider. Choosing the right one is crucial when deciding what type of investments you want to make. If you don’t mind the wild market swings, any provider should do. However, if you want to properly diversify, you want a provider that never handcuffs your decision making. Speak with a financial advisor to help determine the best course of action for your retirement and financial goals.

What Else Can You Do to Be Financially Prepared?

Diversifying your retirement holdings is a great way to be financially prepared, but what else can you do? Make sure you have an emergency fund. Workplaces may start closing and who knows if you will be paid during this time. Having around six months salary saved is a great cushion to have.

Further, diversifying your tax situation is another way to prepare. Traditional plans are great for an upfront tax deduction, however Roth plans offer tax-free distributions. Having funds in each type of plan offers you more diversification.

Lastly, is simple planning. Creating a blueprint and sticking with it is the best way to be financially prepared. There’s ups and down in every facet of life. Be comfortable with your asset investments and be prepared for the fluctuations that may arise. As the country (and world) deal with this terrible virus, you should take of your family and finances as well. You can do this!