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IRA Financial Group Blog

Stock Market Safety

Stock-Market-Safety
3 Minute Read

Last Updated on May 5, 2021

If you’re looking for Stock Market safety and security, you may be looking in the wrong place.

Key Points
  • Stocks traditionally perform poorly
  • Diversification is key
  • Taking better care of your money now can mean a lifetime of income

Stock Markets

At this point, everyone may feel like they understand the stock market. But the past year has revealed new scenarios that many didn’t see coming, such as the Gamestop situation that took place, causing the stock of a gaming store that didn’t seem to have much of a future to skyrocket due to manipulation from outside investors.

Traditionally, investors put their funds into areas they believe in, think will profit, and that they can carry long term. The stock market originally began to fund investment in the Dutch East India Company, in Amsterdam, to spread the risks out so no one person or family would stand to lose so much in the event of failure. In fact, the Dutch East India Company became the first stocks available in what would become the modern form, in an effort to increase stock market safety by spreading the wealth and the risks.

In the late 1700s, what was to eventually become the New York Stock Exchange was founded, followed by other markets in the United States, and around the world. Today, investors have myriad choices regarding where they want to invest, and often retirement plans do so for the long term, expecting there to be a large enough return to keep their fees paid and their customers happy.

Best Stocks In History

There are a number of stocks that have been around for decades, and have paid out well in terms of dividends. But what are the best stocks from a general investing point of view? What are the stocks that people have trusted over the many years that stock markets have been in existence?

Gas and oil companies top the list of those producing gains, as the world currently runs on fossil fuels. Unless and until the world’s largest nations are willing to move their services to alternative fuel sources, this area is likely to continue to be one of interest.

The banking industry is closely tied to all things finance, and certainly represents another power player in the stock market. Technology firms are also performance winners, considering the ubiquity of cell phones, laptops, and tablets.

Stock Market Safety

So with all of the volatility in the various stock markets, concerns over shares or manipulation, and questionable acts of those who already have too much money and not enough sense, what investments help promote stock market safety in your portfolio?

The truth is, diversification is the key.

If you’re looking to fund your retirement with a portfolio you’ve put together yourself, there are ways to do it. Rather than relying on an employer’s 401(k) plan that they offer to everyone in the office, there are individual retirement accounts that can help you.

The Self-Directed IRA

The Self-Directed IRA is a retirement account vehicle that is best known for allowing investors to use retirement funds to buy alternative assets, such as real estate. “Self-Directed IRA” is not a term of art and you will not find it anywhere in the Internal Revenue Code (“Code”).  It simply refers to an IRA account which is permitted to be invested in traditional assets, such as stocks, but also alternative assets, such as real estate. One major advantage of investing in alternative assets with a Self-Directed IRA is that all income and gains are tax-deferred until the time when the IRA holder takes a distribution.

The Solo 401(k) Plan

A Solo 401(k) plan is a 401(k) qualified retirement plan that was designed for self-employed individuals and small business owners with no full-time employees, excluding a business partner and spouse. Much like the traditional 401(k), this unique plan encourages individuals to save for retirement in a tax-advantaged environment. When participants contribute funds into the Solo 401(k), taxes on the funds will be deferred until the participant takes a qualified distribution.

Retirement Plan Safety

If you’re looking for guarantees, there may not be stock market safety for you. All stocks have the possibility of going up or down, gaining or losing market value. So tying all your funds up in the stock markets may not be what you want to do with your money.

To be better secure with your retirement funds, it might be beneficial to diversify your holdings, especially if you are a solo entrepreneur and have the ability to invest in those areas you know best. Real estate is the most popular investment area for Solo 401(k) holders, and this is because so many opportunities are available, as well as because the potential for rental income as a passive inducement is quite popular.

Especially now, with a pandemic, social unrest, and distrust of authority figures at what could be all-time highs, individual retirement accounts allow an investor to choose what they know best and invest in that, or those, areas. For real estate there’s raw land, condominiums, rental properties, flips, and more. Retiring with money for your future is what the area of concern should be, and using your own knowledge to diversify holdings can help protect you against volatility.

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