Ira Diversification

Written by Johnny Kitchens
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Diversification is not just a good idea, it is almost always the best idea. Diversifying helps to shield your investments from fluctuations and volatility in various markets. In only a very few instances have events led to declines across broad areas of investments, hitting diversified portfolios almost as hard as narrow ones. The level of diversification that is best for your portfolio is a direct product of the amount of risk you are willing to accept.

High-risk investments, when they work out, can yield returns far beyond those of safer investments. Risk-assessment dogma says that, unless you are extremely lucky, you will lose money on high-risk investments more often than you will gain big. Some people do realize huge returns on risky investments but they are not the norm. A diversified portfolio can take risks, but only when balanced by more conservative investments.

Many of the major IRA providers consider diversification to be limited to a mix of stocks, bonds, mutual funds, and other publicly traded securities. Many investors, however, see such a mix as being too limited and prefer to also own real estate, bullion, foreign stocks, and various commercial enterprises (like golf courses, timberland, franchises, and more) in their IRAs. Such extensive diversification is usually only possible in a self-directed IRA.

Diversifying with a Self-Directed IRA

People with little investment experience and the wrong IRA advisor (for them) can get into trouble with a self-directed IRA. If you have little experience, you need an advisor that will help you make good decisions and stay within the rules rather than an advisor that takes a completely hands-off approach. There are advisors of both types and the hands-off approach is exactly what some investors want. A self-directed IRA can help you diversify your investments enormously, but you should take care to educate yourself on the rules for various investments.

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