For many individuals, an individual retirement account (IRA) is a vital financial tool to help them prepare for retirement. There are a lot of details that you need to consider when saving for retirement and deciding which holdings you want to invest your money in.
One detail to keep in mind is how you will diversify your IRA. Diversification is an essential component of any IRA, as it hedges your retirement savings against a fluctuating market. Check out a few ways to diversify the money in your IRA.
1. Invest in Precious Metals
Precious metals are an excellent alternative to conventional stocks and bonds. The term precious metals refers to any naturally occurring metallic chemical element with a high value and limited availability.
Gold, silver, and platinum are some of the most common precious metals. Holding precious metals allows you to incorporate gains from the value of these metals into your retirement savings. Over time, precious metals tend to rise in value due to their rarity.
There are a couple of ways to add precious metals to your IRA. One solution is to invest in a holding that funds the discovery of precious metals. Another alternative is to invest in actual precious metals, like silver coins or gold bullion. This is an excellent option for investors who want to buy precious metals while still maintaining the tax-advantaged treatment of their savings.
2. Add Dividend-Paying Stocks
Dividend-paying stocks are a nice hedge against other, riskier stocks. Though dividend-paying stocks do fluctuate in value, the fact that they consistently issue some type of dividend means that you'll consistently earn some type of return on your investment.
For example, assume you invest $10,000 in a dividend-paying stock. After a rough year with a volatile stock market, the value has dropped to $9,800. However, the company decides to issue a 5 percent dividend to its stockholders. For simplicity, assume the dividend amount is based on your original investment. You'll receive a $500 dividend payment that helps offset the fluctuations in the stock market.
3. Integrate Real Estate Holdings
Many individuals want to add real estate to their investments, but find the prospect of becoming a landlord or property investor too daunting. Instead, add real estate holdings to your IRA. You can invest in a holding that consists of funds for companies that specialize in buying and selling real estate. Let these companies handle the buying, selling, and renting portions of real estate ownership while you take advantage of rises in real estate and land values.
For more information about retirement plans like a precious metals IRA, contact a financial services company.