As your retirement portfolio grows, you’ll need to become more active in the management of your various retirement savings accounts. It’s true that you probably won’t need to spend a great deal of time balancing or diversifying a retirement portfolio of $5,000. But once your account balance reaches $50,000 or $500,000, portfolio balance and diversification will become much more important. Here are some tips for doing so.
Consider All Your Options
Make sure you understand all of the investment options you have available to you with your self-directed IRA. If you’re new to working with a self-directed IRA custodian such as Quest Trust Company, then you may not realize all of the different investment choices you have with that type of account. In addition to stocks and bonds and mutual funds, you can use a self-directed IRA to invest your retirement savings in things such as precious metals, real estate, and even private debt and equity.
Having this degree of investment flexibility allows you to diversify in ways that you wouldn’t be able to do with your 401(k), or an IRA that’s held with a traditional custodian such as a discount brokerage or your local bank. If you’re not familiar with how a particular investment works, educate yourself so that you can decide if it’s appropriate for you.
Find the Right Solution for Your Needs
There isn’t a single best diversification strategy that works for every single investor in every stage of their life, and regardless of their individual financial situation. Different individuals will have different amounts of retirement savings in other accounts, different family needs, different desired lifestyles during retirement, and so on.
As you work to balance and diversify your retirement portfolio, make sure you understand what your long term financial goals are, and how your retirement portfolio fits into your overall financial situation. What type of retirement do you envision? Do you have other sources of retirement income? Will you want to use your retirement accounts as a way to accomplish other goals, including perhaps estate planning?
It’s important to take an active role in your retirement savings. This doesn’t mean that you need to trade in and out of your investments on a daily basis (and, in fact, that approach will almost certainly negatively impact your investment returns). But it does mean that you should stay current on how each of your investments is performing, and whether any market conditions have changed in such a way that you would not purchase that same investment again if given the opportunity to do so.
That’s such an important fact that it bears repeating again – In order to be able to effectively balance and diversify your portfolio you need to be up to date on the current market realities. Get in the habit of reviewing and analyzing your portfolio periodically, in order to make sure you’re maximizing the growth potential of your retirement account.