Moving From Good to Great as a Self-Directed Investor
Most self-directed investors focus on one main investment class and never diversify. While real estate may offer ample growth opportunity and a fairly reliable ROI, the best investment portfolio is one that is diverse. Here are three benefits of diversifying your portfolio, from the experienced team at iPlan Group.
3 Benefits of True Investment Portfolio Diversification
- Mitigate Risk
Stock market corrections and crashes are going to happen. When they do, having true diversity in your portfolio could mean having a financial or retirement life raft. Diversification isn’t just a solid investment strategy, but one which can help insulate you from that next big market correction.
But what do we mean by “true diversification”? We mean having multiple investments of varying risk in both traditional and non-traditional investments.
In addition to your traditional stock portfolio, consider non-traditional asset classes like:
- Real Estate
- Precious Metals
- Tax Liens
- Promissory Notes
And many more. By including self-directed, non-traditional investments in your portfolio, you’re further diversifying and mitigating your exposure and risk into more than one investment space.
- Keep Growing
If you’ve already invested in a non-traditional asset like an investment property, you’re watching your IRA grow monthly as the rental income directly funds your retirement. The eventual sale of the property will provide even greater funding.
Rather than sit on that investment alone, you may want to consider looking at other non-traditional options to further diversify and grow your retirement. As we shared in our eBook, “How to Think Like a Wall Street Investor,” several investments with varying degrees of risk will typically yield greater returns than one long-term, moderate risk investment.
- Preservation of Capital
Your self-directed investment is likely only one of several investments in your portfolio. Using your self-directed investment to preserve capital will avoid the loss of value in other, more aggressive investments.
If you’re safely invested in precious metals or a trusted real estate investment property, that percentage of your retirement capital is minimally exposed to loss. It will also likely grow at or above the rate of inflation. Preserving capital is a strategy often employed by current retirees. The value of their retirement savings won’t decrease over time.
Whether you’re a one-time self-investor, or a seasoned pro with many investments, check out the eBook mentioned above and check that you’re following the three fundamental principles of investing.