Do not put all eggs in one basket. You must have heard this famous saying at least once in your life. Believe it or not, it is the most important, or you can say as the thumb rule when it comes to investments.
When you put money in assets, it becomes necessary for you to spread your investment in different types of assets. It is known as diversification, and that helps you to guard your investment portfolio against economic fluctuations.
Diversification is the first step in protecting and growing your investment funds. And it is precisely the reason for which you need to consider a Self-Directed Individual Retirement Account (SDIRA) to save money for your post-retirement years.
What is an SDIRA?
An SDIRA is a retirement savings account with many tax advantages over a regular IRA. It can be a traditional or Roth IRA with the same contribution limits. You can self-manage the account and avail IRA custodian services from a trusted organization only for carrying out your instructions.
The Diversification Feature
One of the key differentiators of an SDIRA from a regular IRA is the diversification options. An SDIRA allows you to invest in more assets than what an IRA allows.
In addition to all the IRA allowed options, such as stocks, bonds, mutual funds, and other investments, SDIRAs allow you more options, such as rental properties, precious metals, a privately-held company, etc.
As you can more diversify your investment portfolio with an SDIRA, you can not only spread your investments across assets but also secure those against the economic fluctuations.
Volatility in markets underscores the need for proper asset allocation and diversification of portfolios. You can easily diversify your retirement portfolio with an SDIRA. With the account, you can invest in a lot of alternative assets, such as real estate, precious metals, startups, etc.
The alternative assets usually have a low correlation with the traditional assets, like stocks, bonds, etc. which are prone to economic fluctuations.
Diversification of your investment portfolio is not the only reason for you to consider an SDIRA. There are a lot more. Refer to the infographic in this post to know all the reasons.