3 Ways to Play Volatile Markets with Alternative Investment Options

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In the midst of a nine-year bull run following the financial crisis of the late 2000s, the major stock market indices have repeatedly oscillated between all-time highs and sharp corrections in 2018. The S&P 500 peaked at $2,872.87 in late January before plummeting to $2,532.69 in a matter of days. The benchmark index then recovered to a new high of $2,940.91 in mid-September before dropping to $2,691.43 one month later. The other major indices--the Nasdaq composite and the Dow Jones Industrial Average--have endured similar roller coaster rides throughout the year (per www.tradingview.com).

To view investing through a long-term lens is to understand the possibility of occasional market corrections. However, when such corrections occur in close proximity to one's desired retirement age, new considerations for alternative IRA investments may emerge. Let’s examine three such potential considerations.

Discontent in stocks can drive investors to tangible assets

When faced with volatility, stock investors may sell their equity positions and move toward investments they deem less risky. Precious metals have long been considered staples in the risk-off marketplace. As investors sell stocks and buy metals, prices of the former may continue to drop while prices of the latter may rise on trade volume. At a minimum, precious metals--and their generally less-dramatic price swings--can help mitigate the effects of a prolonged downturn on Wall Street.

Rising bond yields could direct borrowers to private lenders

One of several recent catalysts for the wavering stock ticker has been the rise of the 10-year Treasury bond yield. The 10-year yield, which recently surpassed 3%, has served as a gauge for lending in the U.S. and may therefore prompt higher interest rates across the lending space. Businesses may experience smaller profit margins (and lower stock prices as a result) if they rely on debt to fuel their operations and individuals may raise an eyebrow when they learn how much student or auto loans, mortgages, or capital for their fledgling start-ups will actually cost them. This is where your self-directed IRA can save the day.

You may discover a broad market of people and businesses eager to find a good deal away from the big banks if your IRA can offer competitive interest rates. Private lending with an IRA empowers you to review potential borrowers in accordance with your risk tolerance and make final decisions on interest rates and loan durations. In this regard, loan origination with your self-directed retirement plan virtually mirrors origination practices with your personal, non-IRA funds.

The next big thing could beat the market

If public companies and their stocks make you cringe, you may find solace in privately traded equity in an up-and-comer. With sound management and business fundamentals, new enterprises can thrive in any market. If you don’t have the inside track on a promising private company, online equity crowdfunding platforms allow non-accredited investors (those with smaller allocable balances) to perform due diligence on listed companies and acquire partial ownership stakes in the one(s) they like. Without exposure to the prevailing winds of the greater stock market, quality private companies can make their marks and reward their investors exclusively on their own merits.

While New Direction Trust Company cannot endorse or recommend any particular course of action or investment strategy, we strongly encourage you to educate yourself on the broad spectrum of alternative assets available to today’s self-directed investors. For more information about taking control of your retirement, please feel free to call our office at 877-742-1270 or send us an e-mail at info@ndtco.com.