On February 8, 2018, the Dow Jones Industrial Average, which has survived such tumultuous events as the Great Depression and every major recession since, fell by 1,175 points for its biggest single-day decline ever. The other major indexes didn’t fare much better, and the grim news across the stock ticker wasn’t isolated to that one day. In fact, it wasn't isolated to that month. After recovering most of their losses from early-2018 and rising again to record territory, stocks took another dramatic downturn from September 2018 through the end of the year. The market technicals and economic indicators seemed to point to a proverbial return to Earth following a decade-long bull run on Wall Street; the analysts suggested that we were seeing a market correction as opposed to a full-blown recession. They may have been right, but what happens when the next correction rolls around but the needle keeps plunging, as it has done before and may do again?
Self-directed IRAs allow investors to capitalize on any market condition and take advantage of considerable tax advantages, but they also provide a critical hedge against the market volatility we saw in 2018. A retirement situated entirely in stocks can suffer when entire indexes shed 5%-10% of their value in a matter of days. Such losses can take weeks or months to recover, and only if the market remains strong despite the drop. An actual recession can undo years of retirement progress. Alternative investment options, on the other hand, can thrive during uncertain times.
Economic conditions may throw real estate prices for a loop and create a chance to buy low. You can earn rental income (people will ALWAYS need a place to live) until property values improve, at which point you can boost your monthly rent or flip the asset for a nice profit. Similar opportunities may arise in the private lending space. As we have seen in the past, banks may not issue loans as readily with a sickly stock market. Your IRA can take advantage of this unmet demand by issuing secured or unsecured promissory notes, all while you, the account holder, qualify potential borrowers and establish terms just as you normally would.
Strategies like these empower self-directed investors regardless of market conditions, but they can also contribute an added degree of certainty when stock brokers nervously fidget their neckties and fund managers start to lose sleep. For more information about self-directed IRA investing, don’t hesitate to contact New Direction Trust Company at email@example.com or 877-742-1270.