One of the foundation principles of long-term investing is diversification. Diversification means that instead of investing all or a majority of your investment funds in a single investment type or asset class, you allocate those funds across different kinds of investments. The rationale is that when you diversify, you guard against experiencing a significant decrease in your portfolio value because a particular investment you hold experiences difficulty.
For example, it would generally be regarded as unwise to invest all of your retirement savings in the stock of a single company. If the share price of that stock were to experience a significant decline, your retirement nest egg would suffer along with it.
The problem is that it can be difficult to achieve true asset class diversification with a traditional or Roth IRA that’s held with a custodian who doesn’t allow the self-directed IRA structure. These types of custodians generally only allow you to invest your IRA funds in assets such as stocks, mutual funds and exchange traded funds, even though the rules and regulations governing IRA’s permit a much broader range of investments.
So how do you find a custodian that will allow you to have a self-directed IRA?
You need diversification and it seems as if your options are limited. That’s where Quest Trust Company can help you. They are the one resource that can help you have a self-directed IRA so you can achieve the diversification that’s so necessary. They specialize in helping investors like you change their lives through their services and free education.
In reality, investing in different stocks or different mutual funds might achieve little real diversification when those assets all tend to follow the direction of the overall market. And while market index funds might appear to offer a broad measure of diversification, your portfolio will still take a hit when the overall market declines. This type of diversification also prevents you from getting the full benefit any “big winners” in your portfolio, since the gains from any winning stocks within the index fund will be diluted by losing stocks. Also held within the fund. Instead, you should look for the ability to truly diversify into different asset classes such as real estate.
Owning real estate can be a great way to balance out some of the more traditional investment types you may hold in your overall retirement portfolio. Regardless of whether you purchase residential or commercial real estate, the positive cash flow you can often realize can act as a balance to the investments you’re holding with an eye towards capital appreciation. Furthermore, given the significant declines in real estate values that have occurred over the past three to five years, a well-informed investor may be able to purchase a piece of real estate at a low price, generate significant cash flow almost immediately, then sell that real estate decades later at a substantial gain.
With a self-directed IRA someone saving for retirement can also buy businesses, make private equity investments, invest in tax liens and make mortgage loans to others. There are many different types of assets that are legally permissible, but which traditional IRA custodians do not allow you to make.
If you’re looking to invest at least part of your retirement savings in a truly diversified mix of assets, then contact Quest Trust Company, Inc. today at 800-320-5950 for your self-directed IRA needs. They offer a free, no obligation appointment with an IRA Specialist designed to give you the information you need to make an informed decision.