An individual retirement account (IRA) is an investment vehicle that allows you to save for retirement. You can also diversify your investment by adding other assets to your retirement portfolio.
This diversification concept involves investing in multiple asset classes to reduce risk. By spreading your money across different investments, you’re less likely to lose everything if one fails. If you have a rough year with one investment or investment type, another may be doing well and cushioning the blow.
Here are six ways to diversify your IRA:
- Consider Precious Metals
Gold and silver have been used as investments for years because they’re considered stable commodities with value worldwide. They’ve also held their value better than other investments during economic uncertainty. Thus, these products might be eligible for your IRA diversification.
If you want to invest in precious metals, be aware that prices can fluctuate widely depending on market conditions. So, shop around for reputable dealers offering competitive prices and high-quality products if you want to purchase gold or silver coins or bars. Also, read up on recent prices of precious metals to know what’s happening with these markets before you invest.
- Purchase Stocks And Bonds
If you’re looking for more control over your investments, buying individual stocks and bonds can be an excellent way to diversify your portfolio—but it’s also risky. You’re better off investing in index funds that track the performance of a particular market segment or industry (like gold mining or energy). That way, you’ll get exposure to all stocks without picking individual ones.
When buying stocks and bonds, look for low costs and high liquidity so that you can buy and sell quickly without paying hefty fees or waiting days while the trade settles. You may also want to consider investing in mutual funds instead of directly in individual companies. That way, you don’t have to worry about picking winners and losers among those thousands of stocks out there.
- Open A Roth IRA
A Roth IRA is a retirement account offering you tax-free growth and withdrawals. So, if you have a traditional IRA, you can convert it to a Roth IRA as long as you’ve had the account open for at least five years and paid taxes on the contributions.
For those who qualify, opening a Roth IRA can be a great way to diversify your investments without taking too much risk with your money. You’ll still have some flexibility with this type of account because there are no minimum contribution requirements. Aside from that, you can also benefit from tax-free growth and withdrawals if certain conditions are met.
- Invest In Real Estate
Real estate can be an excellent way to diversify your portfolio because it provides stability and capital appreciation over time. But real estate investments require significant due diligence and may only be appropriate for some investors. They also tend to be illiquid because they often take months or years to produce cash flow from rent payments.
So, as you invest in real estate properties, have enough money set aside for emergencies and other financial obligations. In addition, always conduct a thorough research about your ideal properties to ensure that you’re making the right investment decisions.
- Invest In An Exchange-Traded Fund
Another way to expand your IRA is by investing in a mutual or exchange-traded fund (ETF). These funds invest in many different stocks or bonds, spreading out the risk of owning just one stock or bond. Consider using one that invests in international stocks or bonds and U.S.-based ones if you want to be more global with your investments. For instance, you can use an ETF that invests in real estate investment trusts (REITs). These REITs buy and manage commercial real estate properties and distribute 90% of their taxable income yearly to shareholders. This means that as long as the value of real estate rises, so will your earnings.
- Participate In Peer-To-Peer Lending Platforms
One suitable method to increase your IRA is by getting involved with peer-to-peer lending platforms. These sites allow investors to lend money directly to individuals or businesses at rates lower than those offered by banks and other traditional lenders. Peer-to-peer lending platforms also offer investors the opportunity to diversify their portfolios by lending money in different geographic locations. This way, if one borrower defaults on a loan, it doesn’t cause too much damage to your overall portfolio.
When looking for this platform, choose a site that offers access to loans from multiple sources. It’s also essential to select a place that’s been around for several years and has a solid track record of success with its borrowers and lenders. As a result, you can feel confident it’ll be around if something unexpected happens with one of the loans.
Key Takeaway
Your retirement account will allow you to enjoy your lifestyle once you grow older or stop working altogether. Therefore, you should diversify your IRA to benefit from various investment options and increase your savings. Above are just some of the ways you can do just that.
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