Category: Self Directed IRA

Women are at greater risk of spending all or part of their retirement in poverty than men. The gender pay gap and the difference in life expectancy are two main reasons for this discrepancy. Over their lifetime, the average woman makes less, works less, and is less likely to have full-time employment than the average man, which can directly affect her retirement savings.

Additionally, life insurance data shows that women live an average of five years longer than men. A longer expected lifespan may equate to the likelihood of spending more time in retirement and this is exactly why the topic of retirement planning for women is seemingly more important than ever before.

So, when it comes to retirement goals, women may want to consider a different strategy than their male counterparts.

Retirement Planning for Women

You may have likely heard the arguments on all sides about the gender pay gap. This brought forth the formation of many organizations to help close the gap, but that might not immediately help female investors currently juggling family responsibilities and their retirement savings.

Some retirement portfolio management services often elicit similar advice to all genders, overlooking the issues women face, which could potentially leave them more susceptible to impoverishment than men. While this is not intentional, it’s important for women to keep these differences in mind when planning for their future.

Because female investors are statistically more likely to live at least five years longer than men, a good option would be to have their retirement goals reflect this. A good way to prepare is to save a little extra cushion for any unplanned expenses in retirement.

One of the higher unforeseen costs in retirement is medical expenses. Some investors believe that Medicare programs are designed to cover all their costs. In some cases, retirees may need extra cash or a supplemental plan to have everything covered. Unforeseen healthcare costs may become a more significant problem for women because of their potentially longer lifespan.

Meet Your Retirement Planning Goals on a Limited Budget

Some studies have found that women with families are more likely to prioritize the family’s financial needs—like groceries and college funds—before putting money aside for later. When investors consider putting savings ahead of disposable income spending, they are often better able to save for the future. It may take a little getting used to, but paying for the future first reduces the risk of potential poverty later.

Women at all stages of investing should consider using every retirement savings vehicle available. For example, investors can contribute to both a 401(k) and an IRA simultaneously, both of which utilize pre-taxed money.

Mothers who take time off to have or adopt children and are married can consider saving in a spousal IRA while they are out of work. A self-directed IRA account could allow for more diversification which might accrue wealth faster by investing in alternative assets.

Meet Retirement Goals with Alternative Investments

Digital Trust offers women a way to invest their retirement savings or parts of it into alternative assets, like real estate, precious metals, LLCs, and digital currencies.

Investing in alternative assets allows you to diversify outside of traditional market-based products. Some tangible items may be at less risk of losing value in a market meltdown. Take control of your future as you learn more about the retirement possibilities with Digital Trust.*

* Digital Trust, LLC is a custodian of self-directed accounts whose role is nondiscretionary and administrative only. The accountholder must direct all investment transactions and choose the investments for the account. Digital Trust has no responsibility or involvement in selecting any investment. This letter shall not be construed as investment, legal, tax, or financial advice. Please consult with your competent tax advisor and/or legal counsel.

Individual Retirement Accounts (IRAs) are designed to assist investors in saving for retirement. While some investors may prefer to open only a single account type, such as a Roth IRA or Traditional IRA, others may choose to open one of each to maximize their retirement potential.

For investors seeking answers to the question “how can I diversify?” There are no limitations on the number of IRAs that one investor can have. In certain situations, investment advisors may recommend utilizing multiple IRA accounts for various reasons.

Pros

Diversification
Each type of IRA has its own set of rules. For instance, some institutions allow investments in alternative assets like cryptocurrency and real estate with a self-directed IRA (SDIRA), whereas others limit investors to publicly traded assets like stocks, bonds, and mutual funds in a Traditional IRA.

Therefore, having multiple IRAs can help diversify a retirement portfolio. Some investors prefer to use one IRA for each asset class. For example, an investor may hold mutual funds in their Traditional IRA, stocks or bonds in their Roth IRA, and real estate or precious metals in their SDIRA. Having multiple IRAs, each with a different asset class, can help partition a portfolio, making it easier to keep track of.

Spousal IRAs
Investors can fund individual and spousal IRAs, which can be beneficial if a spouse has little to no income. In a spousal IRA situation, investors may choose to contribute the total amount for the year to an individual IRA and the same amount to a spousal IRA on their spouse’s behalf. However, this is only possible if a spouse earns a low income.

Required Minimum Distributions
When an investor turns 73, they must withdraw a certain amount from their IRA each year, which is known as a required minimum distribution (RMD). The total RMD depends on the investor’s age and the account balance.

Investors with multiple IRAs may choose which account to take distributions from while safeguarding the others from distributions and taxes. This is called tax diversification, and some individuals use this strategy when planning to leave money for family or others and do not require it for living expenses during retirement.

Cons

Contributions
Funding multiple IRAs does not necessarily mean that an investor can contribute unlimited amounts to retirement accounts. There are still restrictions on contributions, with a maximum limit of $6,500 or $7,500 (depending on age) across all accounts. Consequently, some individual accounts may not be as large when investors reach retirement age.

Fees
Many accounts come with fees, and multiple fees can erode returns, particularly for investors who are trying to spread $6,500 yearly across several accounts. Hence, it may be wise to consider the fees for each custodian or brokerage when setting up multiple IRAs.

Complexity
The more IRAs an investor funds, the more work is necessary to keep track of their performance. While some investors may enjoy the challenge or risk, others may not have the time. Therefore, investors should consider the complexity involved in holding multiple accounts before making a decision.

How to Diversify with a Self-Directed IRA

One of the best reasons to utilize multiple IRA accounts is for diversification. Savvy investors seeking further diversification can hold alternative assets in a self-directed IRA. Digital Trust makes investing in alternative investments more accessible than ever before.

Moreover, they offer a wide range of products, including cryptocurrency, real estate, LLCs, and precious metals. Investors considering multiple IRAs for diversification purposes can open an account through Digital Trust* today and learn more about funding or rolling retirement money into an SDIRA.

* Digital Trust, LLC is a custodian of self-directed accounts whose role is nondiscretionary and administrative only. The accountholder must direct all investment transactions and choose the investments for the account. Digital Trust has no responsibility or involvement in selecting any investment. Digital Trust does not provide investment, legal, tax, or financial advice. Please consult with your competent tax advisor and/or legal counsel.

With inflation at multi-decade highs and prices increasing across the board, everyone seems to be talking about the impact of inflation. What’s more concerning is how inflation will affect the economy and your investments. The market has dropped significantly, but inflation has not gone away — so how do you prepare your portfolio to be hedged against inflation if this is just the first leg down?

Traditional analysts recommend investing in commodities, gold, bonds, and other alternative assets, but are they really inflation-proof? Gold has long been touted as an inflation hedge, but expert Andrew Bloomenthal recommends bonds instead. He cites that gold prices fluctuate too much and that the return on bonds with increasing rates is a better alternative.

The traditional market isn’t the only one available to consider anymore. There are some alternative assets investors can consider for an IRA to hedge against inflation.

Hedging Your IRA Against Inflation with Alternative Assets

Investing during high inflation can be tricky because there are many moving parts: Rising costs, consumer demand, and governmental reaction are only the beginning. These parts can impact how assets grow and fluctuate.

Rental Properties

In an inflationary environment where rates are rising, there is a chance that real estate prices could drop, but at the same time, rental costs increase.

So, rental properties offset the cost of inflation with higher rents. The good news is that investors can own rental property in an IRA.

Using real estate as a long-term investment may provide a solid IRA infrastructure since housing prices tend to rise over time. Adding rental property to a portfolio may enhance the investment with the income made from rent.

Investors who don’t want the hassle of dealing with tenants can invest in commercial real estate or contribute to a property as a partner or through a crowdfunding site.

Businesses

In addition to real estate, investors can utilize an IRA to contribute to and realize returns from many types of businesses not listed on the stock exchange. This may not seem inflation-proof at first, but thinking strategically, there are plenty of business types that stand a good chance of beating inflationary pressures.

For example, traditional analysts recommend investing in commodities during times of high inflation. Investors can consider companies involved in commodity production or alternative energy production to meet this requirement. Other inflation offsetting industries and business structures include banking, supply chain logistics, and — to a degree — processing and manufacturing.

Cryptocurrency

You can consider a cryptocurrency investment as similar to investing in a business because each cryptocurrency supports or represents a project. There are cryptocurrencies backed by gold and other commodities. Some cryptocurrencies are also created to prove liquidity, and some are made specifically for trading real estate and other smart contracts.

While all cryptocurrencies are not inflation-proof, many projects are disconnected from the mainstream monetary system, shielding them from the effects of inflation. Take EOS, for example; the EOS token supports EOS.IO, a platform for decentralized app development with extremely fast transaction times. The price of the cryptocurrency will likely rise as more app developers use the platform to create and run their apps — giving it the characteristics of a commodity.

Adding Alternative Investments to My IRA

Digital Trust offers ways for retirement savers to add a wide assortment of alternative assets to their portfolios, including real estate, LLCs, precious metals, and more.

Making the switch or opening an account is easy, even if you don’t currently have a self-directed IRA. Simply contact the knowledgeable staff at Digital Trust, and you will be on your way to adding inflation offsetting assets to your IRA in less than a week. Visit Digital Trust to learn more today!

It’s easy to fall into the trap of thinking the only investment opportunities are in stocks, bonds and ETFs. Thanks to self-directed IRAs, there are many ways to get creative and find viable investments for your retirement account.

For instance, investors can make a partial stake in a large rental property or hold another family’s business through a self-directed IRA. Let’s look at where smart investors can find alternative investment ideas and ways to maximize IRA investment opportunities.

Setting up Alternative Asset Management Capabilities

There aren’t many additional steps necessary to hold alternative assets in an IRA. For example, fully purchasing an investment property with funds in an IRA is pretty simple. But what if there’s a chance to join a group putting up the money for a new housing project, mall, or another multi-million dollar commercial real estate deal? Or a friend asks for help to invest in a business, or maybe a startup company is seeking investors for an online investing platform?

A popular way to get started is to open a self-directed IRA-LLC with checkbook control. This structure will allow the option to participate in alternative asset vehicles without waiting for the custodian to approve and cut a check for a specific investment. A checkbook IRA LLC can also empower investors to easily participate in deals and opportunities they might not have otherwise.

Where to Find Alternative Assets

Thanks to technology, a wealth of investment options can be found on alternative asset platforms. Investors can research almost any opportunity online, from crowdfunded real estate deals, peer-to-peer lending, startups, existing private businesses, cryptocurrency, precious metals, land rights and more.

• Consider one of a few options to start investing in commercial real estate. First, investors with a sizable IRA account can speak with a local commercial real estate broker to learn more about local investment opportunities. Also, consider crowdfunding platforms like FundRise that will allow an investor to transfer funds from an IRA-LLC to become a partial commercial real estate investor in various opportunities.
• If business investments sound more appealing, a self-directed retirement account custodian like Digital Trust can create access to equity crowdfunding as a great way to gain exposure to a wide range of private companies.
• There are several ways to discover asset ideas for investors who would like to focus on cryptocurrency and blockchain project investing. Investors can open an account on an exchange using an IRA with checkbook control.
• There is also no shortage of cryptocurrency-based ETFs; for sizable accounts, there are opportunities to invest in private funds. Finally, one great thing about cryptocurrencies is that investors can indirectly invest in physical assets like gold through Pax Gold—which is highly convenient because it allows the holding of gold without the storage or shipping fees.

Opening a Self-Directed IRA

When you open a self-directed IRA with Digital Trust, you can find ways to fund alternative investment ideas. Digital Trust’s friendly and knowledgeable staff can help you open an IRA-LLC with checkbook control in no time.

With a Digital Trust Self-Directed IRA, investors have the power to access unlimited alternative investment options for their retirement. This technology-driven, self-directed approach to developing a truly diversified retirement portfolio can bring peace of mind to investors.

Sign up with Digital Trust today.

Disclaimer: Digital Trust, LLC is a custodian of self-directed accounts whose role is nondiscretionary and administrative only. The accountholder must direct all investment transactions and choose the investments for the account. Digital Trust has no responsibility or involvement in selecting any investment. This letter shall not be construed as investment, legal, tax, or financial advice. Please consult with your competent tax advisor and/or legal counsel.

After deciding on their favorite retirement vehicle, whether a 401(k), traditional or Roth IRA or Self-Directed IRA, the next step for smart investors could be to consider how to allocate those funds.

There are several topics to consider when deciding the best avenue for a retirement portfolio asset breakdown including but not limited to:

• Age
• Desired allocation percentages
• Risk tolerance
• Alternative assets
• Retirement goals

Armed with this information, investors can develop their top asset allocation strategy and then research the best avenues for their retirement accounts.

Traditional Asset Allocation

Traditional retirement portfolios, like an IRA or 401(k), often allocate assets based on a percentage of stocks and bonds. That type of mix has been considered safe to take investors through a variety of market risks.

Pros

The old proverb of retirement portfolio breakdown of 60/40 stocks and bonds worked because it was successful. The theory holds that stocks create growth potential while bonds provide stability.

Investors who favor security and are a little risk-averse might prefer to consider traditional allocation as a safety net because of its historical success.

Cons

The drawback to the old way of investing is that we’re not living in an old-world economy. Higher stock prices and fluctuations in interest rates have adjusted the new-world look at the “traditional” method.

Savvy investors who prefer stocks and bonds may consider a different percentage of asset allocation — like 85/15 — and hedge their bets using mutual funds instead of stocks and bonds.

Alternative Asset Allocation

Investors can hold many more options in a retirement account other than stocks, bonds, and mutual funds. Alternative assets include apartment buildings, homes, cryptocurrency, gold and more.

Nerd Wallet reports that nearly 60% of Americans are contemplating alternative asset investments, ranking real estate, commodities and crypto as some of their top considerations. A Self-Directed IRA gives investors the power to put their money to work through alternative investments.

Pros

Alternative investments allow smart investors to try to avoid the wild swings of the stock market. While stocks and bonds can change wildly, the value of peer-to-peer lending, for instance, isn’t typically based on market adjustments.

Just as with other investment options, alternative investments can be funded through pre-tax monies, and they may avoid the volatility of traditional public investing.

Cons

The cons to alternative investing depend on the investment selection. Some investment options have higher entry rates than traditional investments, while others create concerns about illiquidity because they are private investments.

Investors can try to hedge against some of these concerns by utilizing alternative investments as a smaller allocation investment. To avoid the traditional 60/40 asset allocation, what’s right for a riskier investment might look more like 15-20% in alternative investments.

Finding Other Investments

With a Digital Trust Self-Directed IRA, investors have the power to find alternative investments for their retirement. This technology-driven, self-directed approach to developing a driven retirement portfolio breakdown can help bring peace of mind to investors.

Recent market adjustments might have a lot of investors questioning: “What can they do today?” Alternating investment strategies to include alternative investments, like gold, crypto or real estate, provides an answer. An account with Digital Trusthttps://digitaltrust.com/ allows investors to control their retirement all in one place.

Sign up with Digital Trust today.

Smart investors are keenly aware that the Fed has raised interest rates in an effort to fight inflation. The rate hike is expected to encourage savings in the short term, so how do these higher interest rates impact long-term investments held in your retirement account?

The affect that interest rates can have on a retirement portfolio often depends on the assets within the portfolio. Because some investments are more likely to benefit from higher interest rates than others, a diversified portfolio can be a safe option to make a retirement account rate-hike proof.

How Higher Interest Rates Affect Retirement Portfolios

Understanding how interest rates work is essential to realizing how an increase can affect different investments. Interest rates are essentially the cost of borrowing money. So retirement accounts that contain more savings investments are more likely to see a rise with an increased interest rate. Meanwhile, portfolios with stocks, bonds or mutual funds may see an immediate dip as the market adjusts to the higher rate.

Savings accounts

Savings accounts are more prone to benefit because higher interest rates for lenders often translate to higher rates for savings accounts. This means that options like money market funds, bond mutual funds, and certificates of deposit are more likely to see improvements.

You may find that some savings options allow for more investment flexibility than others. For example, many money market accounts have no fees for early withdrawal, while terms for a CD typically range from three months to five years, and investors will be penalized for early withdrawal. Some investors may choose to utilize short-term CDs while interest rates rise.

Stocks and bonds

In retirement portfolios that are heavier in stocks, the effects of higher interest rates often vary. For example, immediately after an interest rate hike, stocks are more likely to fall as sellers take advantage of the increase. However, the long-term effect is often an increase in returns.

Investors should evaluate their retirement goals when considering a portfolio of stocks. An investor who is 30 years away from retirement will likely have different objectives than someone who is three years away.

Diversification with Alternative Assets

Diversifying a retirement portfolio with alternative investments can help hedge against interest rate changes. Alternative options include real estate, physical commodities like gold, pieces of companies, various notes, cryptocurrencies, and much more.

While inflation will also affect these assets in different ways, diversification outside of the traditional investment markets could be more likely to shield investments against wild market fluctuations.

How to Invest a Retirement Portfolio in Alternative Assets

Digital Trust offers investors a way to diversify outside mainstream markets—giving customers the ability to access assets usually reserved for the ultra-rich and financially savvy.

This powerful platform offers many straightforward approaches to alternative investing, making it easy to access and understand. For investors who may be concerned about how market conditions might affect a retirement portfolio, see how Digital Trust can bring peace of mind today.

Sign up with Digital Trust today.

The self-directed IRA has been allowing retirement savers to invest in alternative assets since 1997 when Congress lifted diversification restrictions.

While there are still restrictions on some types of investment vehicles, the Taxpayer Relief Act of 1997 opened the door to a whole new world of retirement investing, like gold, real estate, and now crypto. So how do investors take advantage of this opportunity now to put alternative assets in their IRAs, and what does that look like?

Opening a Self-Directed IRA

The first step to tax-advantaged alternative investing is to open a self-directed IRA. The process can be as easy as opening an individual retirement account (IRA).

First, investors should find a custodian, like Digital Trust, to hold the assets and ensure that IRA rules are followed. Next, they can roll other retirement accounts into the new IRA or use newly contributed funds.

Once the self-directed IRA is opened and the funding process is complete, investors can choose from a variety of investment options — like gold, real estate, LLCs, private equity and cryptocurrency — to add to their new IRA.

Precious Metals in Your Self-Directed IRA

Some experts suggest investing about 5-10% of an IRA in precious metals. Like some stocks, gold and silver prices tend to increase over time, but they can be volatile.

Gold and silver can be considered safe-haven investments, as they often increase in value when investors sense trouble in other markets. The primary rules around precious metals are that the IRS requires them to meet certain standards and they must be stored at a depository (not in your home). For example, to hold gold, it needs to be 99.5% pure, or 99.9% for silver. Meanwhile, some products like American Eagle coins are not as pure but are still considered acceptable investments.

Real Estate as a Retirement Investment

Real estate can be a viable investment vehicle in a self-directed IRA because of the potential tax benefits. Investors should keep in mind real estate is often a larger investment, so it may take up a more significant portion of an IRA than a precious metals investment.

This category has a few rules to remember compared to other types, too. One rule that easily trips up most people up is self-dealing. Self-dealing occurs when IRA owners make investments or loans that benefit themselves or family members.

One example of this includes self-funding the down payment for a property. A buyer will need their custodian to take care of all transactions surrounding the property. Another example comprises directly renting space to family members for specific purposes.

If you decide to put a rental property or other types of property into an IRA, consider consulting with someone knowledgeable about the rules and regulations behind what can be done with the property.

Cryptocurrencies as a Retirement Investment

Cryptocurrencies are a relatively new asset class and are becoming increasingly popular as retirement investments. Generally, investing in crypto for retirement is easier with a custodian that offers crypto trading, like Digital Trust.

When a custodian does not offer crypto trading, the self-directed IRA owner will likely need to open an LLC to make trades. Using a custodian that offers crypto trading eliminates this step, making it a less expensive endeavor.

Cryptocurrency investments in your IRA are similar to investing in stocks or precious metals as far as risk and suggested allocation size. But on the other hand, crypto can be a great way to add to your diversification strategy.

Why Digital Trust?

Digital Trust offers a variety of retirement account options, including traditional, Roth, SEP, SIMPLE and Solo 401(k)s. Our platform offers investors the ability to invest in a wide variety of alternative investment options for self-directed retirement accounts, including real estate, stocks, mutual funds and cryptocurrencies. Digital Trust is the one-stop-shop that gives self-directed and professional investors endless opportunities.

Sign up with Digital Trust today.

It can be challenging for investors to wade through all the tips and suggestions from friends, family, co-workers, and the internet regarding planning for retirement. Although you may have been told 1,001 things you should and shouldn’t do, there’s a good chance that some of these ideas aren’t true.

In fact, some of these ideas might significantly harm your goals or the outcomes you may have envisioned for a peaceful and abundant retirement lifestyle. Here are five retirement planning myths for you to consider

Myth 1: I can wait to save for retirement.

Daily or monthly financial planning isn’t always the easiest task, especially for a young adult who may have other priorities. Sometimes, the thought of it may even feel  depressing, having to withhold 6% of your income when you have rent and credit card bills to pay as well as student loans, anda night out with friends. Juggling bills and other financial priorities may lead some young adults to think, “it will be fine to wait until I make more.”

While this line of thinking might afford you some reprieve at the moment, it may also put a damper on retirement goals over the long run.

For example, you can only contribute a limited amount of money to a tax-deferred retirement account each year. So, you may be limiting the total amount of tax-deferred earnings you can contribute to your retirement, even if you choose to only contribute a fraction now compared to what it will be later when you might be making more money.

Putting off retirement contributions also means that more money will need to be contributed later. It may end up that it is not easier to contribute larger amounts later.

Myth 2: My tax bracket in retirement will be lower.

Investors may assume that their income will be lower in retirement. This understanding leads people to think that they may need less money in retirement to cover things like income taxes. At the start of retirement—before investors may have to take Required Minimum Distributions (RMDs)—they may find that navigating a lower income is possible. On the other hand, once RMDs are incurred, there is the possibility of making more money than you had while working.

Some investors choose to offset potential tax-bracket changes by opening after-tax retirement accounts like a Roth IRA rather than a traditional tax-deferred IRA. Another option to consider would be investigating qualified charitable distributions, and other solutions when the time rolls around.

Myth 3: I can rely on Medicare when I retire.

Medicare often pays about 80% of medical costs. Therefore, some retirees choose to pick up supplemental or gap insurance or pay out of pocket for the remaining expenses.

Planning for these costs out of pocket might seem scary if you are far from retirement because it could be possible for medical care inflation to run higher than the average inflation rate. Today, Fidelity estimates that a healthy retired couple could plan to spend $300,000 on additional medical costs.

Myth 4: I can hit my retirement goals with my home equity.

There are many ways to use your home equity as part of your retirement plan. Still, it isn’t easy to gauge precisely how much equity you will have accumulated the further you are from retirement.

The housing market is just like any other market and can experience volatility with unexpected dips or surges. It is difficult to anticipate a bubble, a bust, or even accurately predict how the real estate market will change the value of your home at retirement age.

Myth 5: My spouse, social security, or inheritance is my retirement plan.

Relying on others for your future may seem like a comforting or convenient idea, but know that it may not always work out as planned. For example, if you are waiting for an inheritance from your parents, it’s possible that something may come up that could cause them spend the money on something else, such as their own medical bills or other care before it reaches you. In addition, it’s important to note that social security alone may not cover all of your future needs or retirement goals.

Prudent future planning is best done when you actively participate in the solution.

Planning for Your Retirement

DigitalTrust* offers a multitude of ways to help you begin planning for your future. This technology-driven, self-directed approach to retirement portfolio diversification can help bring peace of mind to investors, who seek to learn what their options are when it comes to traditional and alternative investments, while planning for their golden years.

Sign up with Digital Trust today!

* Digital Trust, LLC is a custodian of self-directed accounts whose role is nondiscretionary and administrative only. The accountholder must direct all investment transactions and choose the investments for the account. Digital Trust has no responsibility or involvement in selecting any investment. This letter shall not be construed as investment, legal, tax, or financial advice. Please consult with your competent tax advisor and/or legal counsel.

During the Global Financial Crisis from 2007-2009, the mechanics of the underlying market began to change. Central banks implemented quantitative easing (QE) programs worldwide to keep banks afloat and the markets on the up and up.

These programs worked wonders initially, spurring a long-standing bull market that was met with continued QE any time the market threatened to pull back. The most recent QE program was initiated as the 2020 pandemic settled in.

While other sources can cause temporary market downturns, there is no question about it; the world revolves around money. So, what happens when unprecedented amounts of cash are poured into the system to solve relatively small problems compared to what the world faces today? The answer is volatility and high asset prices.

How Volatility is Driving Alternative Retirement Investment Options

Simply put, the more volatile a market, the more diversification your portfolio may require. Volatility can introduce risk in the form of price fluctuations. So, retirement portfolios holding the traditional 40/60 ratio of bonds to stocks may be at risk of losing more money in a downturn than ever before. The mechanics behind this added risk can be complicated and may involve the flood of money into these traditional assets, raising their prices, and increasing their volatility.

One way to think about the situation is if a share of the S&P 500 was valued at $2,000, a 1% move would change the value of $20; and, if a value of the share reaches the $4,000s, a 1% move would be twice that amount. So, a $100,000 investment in the S&P 500 today may be more likely to lose twice as much as it would just a few years ago in a standard 5-10% correction. Then, if you take into consideration the volatility factor, it could potentially be a recipe for disaster in a retirement portfolio.

Alternative Retirement Investment Options

While some investment advisors continue to make the recommendations they have been pushing for decades, more investors are learning that alternative investment products can be invested in IRAs and other tax-advantaged¹ accounts.

In an effort to reduce the risk of being involved in the volatility, many people are moving money out of the stock markets and into alternative retirement options, like real estate, precious metals, private equity, cryptocurrency, and other growth vehicles.

Unlike the S&P 500, a real estate investment is less likely to get a 50% haircut if you are invested in a sought-after area. Additionally, by moving your assets away from the traditional market structure, you may be able to diversify your holdings further.

An option you may want to consider is asset diversification. Using alternative retirement options can serve as a good way to hedge your portfolio against the likelihood of a market downturn that may not resolve itself in time for retirement.

For example, your portfolio could include options like timber rights. Commodities tend to do well when the market goes south; should tech stocks plummet, the income that could be made off of timber rights could potentially increase with the price of lumber.

There are so many ways to get creative with your portfolio using alternative retirement options. Digital Trust offers a range of alternative retirement plan options, including self-directed IRAs and solo 401(k) plans for self-employed business owners with no employees. Plus, easy sign-up options help you begin pursuing alternative investments to diversify your IRA².

Sign up with Digital Trust today!

¹Some taxes may apply. We recommend you consult your tax, legal, and investment advisor.

²Digital Trust, LLC is a custodian of self-directed accounts whose role is nondiscretionary and administrative only. The account holder must direct all investment transactions and choose the investments for the account. Digital Trust has no responsibility or involvement in selecting any investment. This letter shall not be construed as investment, legal, tax, or financial advice. Please consult with your competent tax advisor and/or legal counsel.

Portfolio diversification is a popular topic that has different meanings to different people. What most people can agree on, though, is that the aim of a diversified portfolio is to maintain overall positive growth through market fluctuation.

So now you may be wondering how to diversify your retirement portfolio. Typically, one could start with an S&P 500 index fund that provides exposure to 500 stocks because that number may feel like diversification. The catch is that S&P 500 holdings are weighted. The largest index weighting is information technology, making up 28.7%—meaning that almost 30% of your portfolio would be invested in tech.

These “weighty problems” may be avoided by thinking beyond the Index. Consider these five tips that will help you manage your own diversified retirement portfolio.

1.  Think beyond stocks and bonds

The traditional diversification mantra postulates the best investing formula as a 60/40 split between stocks and bonds. But there are many other ways to spread and grow one’s wealth. For example, in the realm of non-tangible assets, one may look to invest in money markets, REITs, convertible notes, crowd investing, cryptocurrencies, non-fungible tokens, peer-to-peer loans, and much more.

Some investors like to invest chunks of their portfolios in tangible items, like real estate, precious metals,  and more. The point of thinking beyond stocks and bonds is that it moves parts of a portfolio outside of one specific financial class. By diversifying asset classes, investors can try to avoid the impact of negative swings that can happen within the market.

2.  Consider correlations

Assets with prices that move similarly are considered highly correlated. If every asset inside a retirement portfolio is moving up, that’s great, but realize that they could potentially all move down together as well because of their correlation.

When seeking diverse investments, you may want to look for assets that do not move in conjunction with one another. You can start by researching various assets to get a better understanding of intermarket relationships. Then, you could look intoto investment products that do not trend in tandem.

3.  Don’t get too personal

Believe it or not, one’s employment and location can affect his/her portfolio diversity. Let’s say your company offers and matches your contribution for stock options. You may want to consider your sector when you start your research for diversification. For instance, if you work for Amazon, your portfolio is already heavily exposed to tech, so you may want to evaluate other asset classes or alternative investments.

Other factors you may want to consider are possible events that could have either a positive or negative portfolio effect in the geographical locations of your investments. For example, the number of companies on the S&P 500 that tagged “wildfire” as a risk factor has jumped in the last decade due to the increased frequency of fires in California.

4.  Expand your horizons

The U.S. is a great place to invest, but it’s a big world out there. You can consider investing in some global or regional index funds. Countries grow at different rates. Thus, you may want to consider taking advantage of high growth periods in other countries, while also diversifying the risk of any negative impact events occurring in the U.S.

5.  Stay dynamic

Keep in mind that markets and assets are constantly evolving and that they very rarely travel in a straight line. Planning and reallocating money is critical to making the most of a retirement portfolio. Rebalancing can be especially important after significant growth in one portion of a retirement portfolio.

For example, investors could consider which sectors will provide the next round of big growth after a stock boom. And you may want to weigh in on how you’d like the money made from the boom to be reallocated to new locations to take advantage of new growth in other areas.

How to diversify your retirement portfolio

There are many ways to diversify your retirement portfolio. One option may be to start by telescoping out and thinking about your actual risk exposure. From there, you may be able to formulate a plan to achieve better diversification and seek out platforms and services that fill those needs. Digital Trust allows retirement portfolio investors one easy place to hold, track, and trade alternative assets within a self-directed IRA.

Open up a retirement account with Digital Trust* and start diversifying your portfolio today.

* Digital Trust, LLC is a custodian of self-directed accounts whose role is nondiscretionary and administrative only. The accountholder must direct all investment transactions and choose the investments for the account. Digital Trust has no responsibility or involvement in selecting any investment. This letter shall not be construed as investment, legal, tax, or financial advice. Please consult with your competent tax advisor and/or legal counsel.