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ADVANTAGES OF DIVERSIFICATION:
Self-directed Diversification Strategy
Diversification strategy for a self-directed individual plan
Is your retirement account truly diversified? Most people believe they are because their account is diversified according to their current Wall Street custodian. But true diversification includes a range of asset classes that include equities (Stocks/Mutual Funds), Fixed-Income (Bonds), Cash (Money Market/ CD’s), Real Estate (Land/Property) and Commodities (Gold/Oil). If you only own equities in your retirement portfolio, you are not properly diversified and need a diversification strategy.
What are the advantages of diversification? The obvious reason is the recent bear market that has devastated so much personal wealth. A truly diversified portfolio helps reduce the risk of substantial losses in a range of economic conditions. When your portfolio is diversified, it can provide consistent performance in a range of economic conditions. Basically, it eliminates the radical up and down swings and provides more financial stability.
True diversification is the biggest advantage of a self-directed IRA versus a traditional IRA. Should your entire retirement account rest with a self-directed custodian? Not necessarily. Again, a diversified portfolio should include a range of asset classes, including equities. But if your current custodian prevents you from expanding the assets you hold, adding a self-directed component to your portfolio will allow for a more balanced, stable investment diversification strategy.
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