Making Alternative Investments: The Pros and Cons of Taking Retirement Into Your Own Hands

Self-directed retirement accounts have gained traction as a viable retirement solution as the democratization of finance leads to smarter investors. Self-directed retirement allows investors to control their own retirement by making investments outside of the traditional marketplace. This allows them to make alternative investments such as partnerships and private mortgages. The nature of the self-directed solution may lead to outsize returns, while raising an investor’s risk profile.

Portfolio Diversity

The advantages of self-directed retirement accounts are multifold. The most obvious of these benefits is the diversification of an investment portfolio. Investors are not as dependent on stock or bond market returns as they would be with a traditional IRA. The self-directed solution gives investors access to products that normally only institutional investors can purchase. Investors can build a far-reaching portfolio that allows them to invest in assets in which they may have an expertise. While there are prohibitions on certain investments such as artwork, coins and other purchases, there is a wide variety of permissible investments.

Favorable Tax Treatment

Another major benefit of a self-directed account is the favorable tax treatment. Like a traditional IRA, investors can defer taxes on their investment gains until retirement. This tax deferment leads to a higher rate of return on investment as investments can be rolled over and compounded without having to pay taxes. Also, some self-directed IRA plans allow you to pass wealth to future generations after death with favorable tax treatment.

These accounts are suitable for high net worth investors who hold most of their assets in their retirement account. Generally, investors in self-directed IRA’s should have a certain degree of investment knowledge and savvy. These products are not suitable for every investor.

Drawbacks

There are some drawbacks to self-directed retirement plans. The first is the greater risk that comes with alternative investments. While the reward for these investments can be great, there is also a greater risk of losing one’s entire investment. Alternative investments are not as transparent as more traditional investments, and that increases the risk of this type of retirement account. In addition, because of the nature of the investments made in this account, investors are at a greater risk of fraud. Thus, it becomes all the more critical to find trusted individual retirement solutions.

Another drawback of self-directed retirement account is the complex tax rules. Although these accounts are generally tax deferred, there are some triggering events that could cause a tax liability. The rules regarding tax treatment for these investments are esoteric and difficult to understand for the average investor. Usually, investors are best off consulting with an accountant or lawyer in order to understand these tax rules and not run afoul of the Internal Revenue Service.

Additionally, for those investors who do not have a long-term outlook, self-directed IRA’s may not be the most suitable option. The alternative investments that are covered by this account are generally not the most liquid securities. Thus, it can take a long time to close out of a position. For investors that would need shorter-term access to their money, that would be difficult to gain in a self-directed account.

Conclusion

There are some benefits to a self-directed IRA. In order to explore this option, consult with an investment professional.

Diversifying with a Career in Technology

Diversifying is a great way to make sure you have multiple options and that your eggs aren’t all in one basket. Fortunately, there are a lot of different ways to diversify nowadays, and we can tell you everything you need to know about how it’s done.

One great way to diversify is to supplement your current forms of income with a career in technology. Not only does this provide you with great job opportunities that can prove valuable, it also gives you a foot in the door in lots of other fields that can help you further diversify. Here’s what you need to know.

Opportunity and Stability

For many people, the biggest reason to choose a career in technology is for the great opportunities and stability that come along with it. Technology has been one of the fastest-growing career fields for quite some time, and it’s only expected to keep growing as technology plays an increasingly important role in our lives.

While many tech fields are competitive, you can expect to have some opportunities right out of the gate. This is something that simply isn’t true with a lot of careers, which is part of what makes tech careers so great. However, the stability of tech jobs is also a huge plus. Simply put, just about every major company in the world needs to hire a tech expert of some sort, so you have a lot of leverage if you’re a talented, qualified individual.

Wage inequality was once a major issue in technology, but thanks to efforts like this one being made for tech engineering wage equality, it’s no longer the issue it once was.

A Side of Success

The biggest reason why a career in technology can benefit you in terms of diversifying is the fact that there are so many neat little methods of making money through technology. If you’re already familiar with computers inside and out, you can find some pretty solid side hustles to keep income coming in from various sources.

Freelancing is one great way to diversify with technology. Since you’re already going to be working with computers—and you may even learn programming and other development and design skills—you can easily sell your services on a popular freelance marketplace. You might help people solve network problems, clean out their computers, or even develop a basic app for personal or small business use.

If you like to write, you can always take your knowledge of technology and combine it with a writing career. People all over the world have tons of questions about technology, so a knowledgeable professional such as yourself has a leg up on a lot of the competition. You can provide readers with information that’s normally only available to professionals who have an in-depth understanding of technology.

No matter how you choose to use your career in technology to diversify, the bottom line is that you have plenty of options. If you’re looking to diversify, a career in technology could be the perfect place to start.

Is it a Good Idea to Diversify Your Business?

Building up a business over time means it grows in spurts. While it may start with a few people in a small office, soon you are up to twenty employees and dealing with exponentially more daily complications with staffing issues, client problems, and a host of other matters.

When considering expansion vs diversification, it’s useful to understand the major differences. Expansion revolves around sticking with growth in existing or similar lines of business. Diversification is partly about reducing risk in the medium-term by doing business in different categories to make the business less vulnerable to a downturn in asingle market.

Future Focused

You always must look ahead to the future for your business. Have you reached the maximum size in the category that you’re trading in? Failing to recognise this can lead to a business that stagnates for years.

For instance, many web studios developing websites either stay as solopreneurs with some outsourcing or have a five-person team that rarely gets larger. Scaling up massively only happens with a few web design studios because they’re mostly dealing in their local market; not nationally or globally.

Most owners want to grow the profits and the underlying value of the business, whether to increase their salary, the profitability, or what they can eventually sell the business for when they retire.

Business Expansion

Expansion often means increasing the sales and number of customers/clients with your existing business venture. If you offer website development, you now aim to sell more deals to new clients. When the company produces a product, you want to sell three times more units of that product.

Scaling up the staff using a temporary staffing agency like Staff Heroeshelps bring in the right people to fill a position in just a few hours. When the business expands too quickly, you cannot recruit full-time employees fast enough. In this situation, a temporary worker fills the gap nicely.

Diversify the Business?

If you’re faced with a business that cannot realistically grow much more than it is now or is treading on water. And these are the best-case scenarios available at this point, then you must look at diversifying the business into other areas.

What’s the best way to diversify? It’s usually to move into an adjacent business category rather than something completely new where there’s no applicable skillset or experience. This has a much greater likelihood of success.

Diversification Should Protect the Business

With a software company, when producing reservation software for the front desk of hotels and hostels,a golf course reservation booking system doesn’t offer any diversification or protective benefits. It may seem like an obvious choice, but should the need for custom booking software disappear, the sales of both booking software products will die in the same trading year.

Diversification should provide benefits for the business as a whole. While one type of software sees sales slowing down, a different software package serving another market is having a banner year. The company might consider cornering the lucrative task management software SaaS marketas a third way to diversify, which offers even greater protection. This avoids being a one trick pony.

There’s the old saying that, “if you’re not growing, you’re shrinking”. That’s certainly true in terms of inflationary pressures. Beyond that, the life cycle of a product or service isn’t forever. Products or services that were useful a few years ago sometimes don’t have a ready market today. A company must always be looking to expand their existing product line and diversify by moving into new markets to avoid shrinkage and eventual shutdown. Owners must push ahead confidently to stay on the growth path.