3 Non-traditional Assets to Protect Your Retirement Capital

protect your retiremetnFinancial analysts, the media, and our local banking institutions are continually providing reminders of how important it is to save for retirement. Saving capital now will give it the time it needs to grow for a future date. Whether your retirement is 5 years away or 35 years away, having a means to protect and grow your capital can be the key to having enough funds to retire comfortably in the future.

While the stock market is often the first place most people look to grow their retirement nest egg, placing the majority of your assets there could lead to disaster. The 2016 market started on shaky ground and many have taken notice. While there are plenty of asset classes outside of the stock market to grow and protect your capital, here are three of the top choices:

1. Bonds

Placing a portion of your portfolio into bonds, is a wise choice and something often recommended by financial advisors. Depending on which types of bonds you purchase, they could be backed by the security and stability of the U.S. Government and/or come with a predictable rate of return.

With most bonds, you aren’t investing in a flashy asset class with unlimited potential, but rather an investment with a stable rate of return for the future. Bonds provide a higher return than can be found with most money markets or savings accounts, but they might not beat the rate of inflation. They may also come with some stipulations as to the minimum amount you need to invest, and might require you to purchase through a brokerage depending on the type of bond you invest in.

Bonds could be a wise addition to your portfolio, but placing a sizable portion of your assets into this investment vehicle will keep you from achieving valuable profits and growing your capital to its fullest potential.

2. Gold

Gold is truly one of the oldest commodities and has been an investment choice for thousands of years. You can purchase gold in its tangible form through coins, bars, and jewelry, or you can purchase it in the form of an ETF, or electronically traded fund. The ETF option can easily be purchased through a brokerage, and essentially requires the same process as purchasing shares of a company on the stock market.

One of the primary reasons you might choose gold instead of other assets is that gold can provide a hedge against the market, and typically has performed well in past bear markets. That being said, like many other commodities, gold is still subject to price fluctuations and has certainly experienced high points and low points over the years. While fluctuations are a downside, you can use gold as a means to protect your wealth should a major currency devaluation occur, or other monetary crisis take place.

Gold is by no means the perfect place to invest your capital, but you can add gold to your portfolios to provide growth especially when the stock market is not presenting an attractive place to invest. If you are going to add gold to your portfolio make sure that you do your homework to find a reputable seller for the tangible asset, and if you are going to purchase an ETF be sure to find the one that makes the most sense for your investment goals.

3. Real estate

A third choice you should consider for your portfolio is real estate. This tangible asset can offer you returns that aren’t tied to the market, provide a hedge against inflation, and you can take advantage of some great tax benefits.

While real estate ranges in price, size, type, and location, one of the best options is single family rentals. At a lower price point than most commercial or multifamily real estate options, you can assemble a portfolio of single family rentals over time. If you purchase properties in multiple neighborhoods you could even add an extra layer of diversification to your portfolio as each neighborhood has localized conditions driving the economy.

While the entry price of real estate is higher than the other types of assets mentioned on this list, you can use leverage to maximize yields and lower the amount of capital you need to put down up front. Furthermore, investment properties can generate profits through appreciation as well as monthly cash flow.

Adding real estate to your portfolio is a great way to continue building wealth and generating income in the midst of an uncertain and risky stock market. Be sure to do the research on which neighborhoods would be attractive to renters and have the potential to grow in the future.

Which Asset Classes Should You Invest in?

Keeping all your eggs in one basket is never a smart decision, and current market conditions should serve as a reminder to diversify your portfolio. It is important to invest in assets that are in line with your investing goals, and the examples listed here can help you see those goals realized.

When considering which assets to add to your portfolio remember that bonds can provide stability, gold can provide growth and a hedge against the markets, and single family rentals can provide cash flow, growth through appreciation, and the ability to use leverage.

If you like to learn how you can add SFRs to your portfolio, sign up for a free consultation below.

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