Bummed About the Stock Market? Here’s How to Diversify Your Portfolio
Estimated reading time: 1.5 minutes
The stock market took a dive last week—with the DOW dropping by more than 750 points. Suddenly, it seems you’ve no choice but to remember that most golden rule of investing: diversify, diversify, diversify.
Contemplating diversification at a deep level requires thinking about how your assets will react in relation to one another and to the broad spectrum of current events. For instance, the rise and fall of the U.S. stock market tends to move large and small-cap shares up or down at the same time.
Your goal is to own a variety of assets, so that when one asset class is on the decline and another is on the rise, you can react appropriately, mitigate risk, and protect your nest egg. Gold has a track record of moving in opposition to the stock market: when markets are down, gold prices rise and vice versa. However, gold is just one of several precious metals you can invest in.
Precious metals are just one asset class, there are many other alternative assets to choose from. Other alternative assets you can add to your investment mix include:
- Private equity
- Private placements
- Limited Liability company (LLC)
- Limited partnership (LP)
- Joint ventures
- Venture capital
- Developed or undeveloped land
- Single-family homes
- Office building
- Shopping center
- Parking garage
- Retirement home
- Industrial building
- Mobile home park
- Mortgage notes
- Performing or non-performing notes
- Micro loans
- Oil and gas investments
- Hedge funds
- Precious metals such as gold, silver, palladium or platinum
- and much more
Where to hold your alternative investments? Naturally, the best place is a Self-Directed IRA. Many alternative assets have a longer hold period or are less liquid, making them good choices for an investment vehicle with a long-term investment horizon. Your capital gains are tax-deferred in a traditional IRA and potentially tax-free in a Roth IRA.
Diversifying your portfolio doesn’t have to be challenging. Download our Self-Directed IRA Basics Guide now to learn more.