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Importance of Investment Diversity

investment diversity

Diversifying your investments can lead to greater investment success than investing in one market. It’s like the saying, Don’t put all your eggs in one basket. In other words, don’t risk everything on the success of one asset, such as stocks. While the stock market may be the most common investment among retirement investors, the 2008 financial crisis is a reminder that Wall Street does not guarantee success. No investment is stable, but different investments perform differently to the economic events. Investment diversity can better protect your retirement funds, as these assets are not moving in the same direction.

President of IRA Financial, and a leading voice in the self-directed retirement industry, Adam Bergman, shares five successful assets that will lead to investment diversity, and shares the benefits of each.

1. Traditional Assets

Stocks, equities, mutual funds, ETFs, etc. are the most popular type of investments among retirement investors. By using the funds in your retirement account to make such investments, all income and gains you generate will not be subject to immediate tax. As a result, they grow in your account unhindered until you take a distribution.

2. Precious Metals

Gold is the most popular IRS approved precious metal to purchase. The benefit of investing in precious metals is that it acts as a hedge against inflation. However, there is a downside when making precious metals investments. The asset does not generate income or returns, such as assets like real estate.

3. Real Estate

The most popular alternative asset among retirement investors is real estate. Real estate helps in diversifying your retirement portfolio and some investors have more faith in this asset than Wall Street. Again, like stocks and equities, all income and gains generated by the investment is tax-deferred without a retirement account.

4. Private Business/Placements

Private business and private placement investments can be very risky, as there is no guaranteed return. Additionally, the investment is not regulated by the SEC (U.S. Securities and Exchange Commissions) or any federal/state regulator. However it has the potential for large returns.

5. Cryptocurrency

Cryptocurrency, such as Bitcoin and Litecoin, is a form of digital money. Although it is called “cryptocurrency”, it is not treated as currency by the IRS, but as a capital asset. Cryptocurrency investments are highly risky due to their volatility, but an advantage of using retirement funds to make investments is that all gains will not be subject to immediate tax.

Get in Touch

Learn how the Self-Directed IRA or Solo 401(k) Plan can help you make alternative and traditional investments tax-free and without custodian consent. Call IRA Financial directly at 800-472-0646 or fill out our contact form to speak with a specialist. To gain more retirement and investment information by tax attorney and President of IRA Financial, Adam Bergman, join our free monthly newsletter, the Retire Wire!

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