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2 min read

Diversifying with Alternatives

Diversifying with Alternatives

Investing in a well-diversified portfolio is a basic tenant of growing your wealth, especially when it comes to retirement accounts. While traditional assets like stocks and bonds have their place, incorporating alternative assets can provide benefits that can enhance the overall stability and potential of your portfolio. Here’s why diversifying with alternative assets can be a game-changer for your retirement planning:

 

1. Exposure to Different Types of Risk

Traditional investments often move in tandem with the market, making them susceptible to the same economic forces. Alternative assets, on the other hand, can offer exposure to different types of risk that are not correlated with the stock market. This includes assets like real estate, private equity, and commodities. By spreading your investments across a wider range of asset classes, you can mitigate the impact of market volatility on your overall portfolio.

2. Safety from Market Swings

Market swings are par for the course for investors, but they can be particularly concerning as you approach retirement. Alternative assets often have lower volatility compared to public markets. For instance, real estate can provide steady income through rental payments and potential appreciation over time. Private equity investments in businesses can offer substantial returns without the daily price fluctuations seen in the stock market. This stability can help protect your retirement savings from the whims of market sentiment.

3. Long-Term Investments Well Tailored to Retirement Accounts

Retirement accounts like IRAs and 401(k)s are designed for long-term investment horizons, making them ideal for holding alternative assets. Many alternative investments, such as infrastructure projects or private placements, are long-term in nature and can take several years to realize their full potential. By including these in your retirement portfolio, you align the investment duration with your retirement goals, potentially reaping higher rewards over time.

4. Enhanced Potential for Growth and Income

Alternative assets often have the potential to generate higher returns compared to traditional investments. For example, investing in a private startup could lead to significant gains if the company succeeds. Additionally, certain alternative investments can provide regular income streams, such as dividends from private equity or interest from private loans. These income streams can supplement your retirement income, providing a more robust financial foundation.

5. How to Find and Invest in Alternative Assets

Locating alternative investment opportunities requires research and due diligence. Start by exploring:

  • Online Platforms: There has been a tremendous increase in the number of platforms that offer alternative investments to all types of investors. Check out our partners page for more information.
  • Financial Advisors: Professionals specializing in alternative investments can provide tailored advice and access to exclusive opportunities.
  • Networking: Attend industry events, join investment clubs, and connect with other investors to discover new opportunities.

Deciding Which Alternatives to Invest In

When selecting alternative assets, consider:

  • Risk Tolerance: Assess your willingness to take on risk and choose assets that align with your comfort level.
  • Investment Horizon: Match the duration of the investment with your goals and retirement timeline.
  • Diversification: Spread your investments across different types of alternative assets to minimize risk.
  • Due Diligence: Research the asset thoroughly, including its historical performance, market demand, and the credibility of the issuer.

Getting Started with Alternative Investments

  1. Educate Yourself: Read up on different types of alternative assets and understand their potential benefits and risks.
  2. Open a Self-Directed IRA: Platforms like ours allow you to open a self-directed IRA, giving you the flexibility to invest in alternative assets.
  3. Start Small: Begin with a modest investment to familiarize yourself with the process and the performance of alternative assets.
  4. Monitor and Rebalance: Regularly review your portfolio and make adjustments as needed to ensure it aligns with your investment goals.

 

Stay Informed and Diversified!

Diversifying your retirement portfolio with alternative assets can offer numerous benefits, from mitigating risk to providing stable income and growth potential. At Rocket Dollar, we are committed to helping you unlock the full potential of your retirement savings and to invest in the things you know and care about.

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