When planning for retirement, one question often arises: Are alternative investments worth the risks? In this video, we explore both sides—highlighting potential challenges like liquidity and fees, while also uncovering unique benefits such as tax advantages, diversification, and inflation hedges. Alternative investments may be complex, but with the right knowledge and long-term mindset, they can help your retirement savings grow. To learn more about weighing the possible risks vs. rewards of alternative investing, read our blog: https://www.madisontrust.com/risks-vs...
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In this video, we’ll compare the possible risks vs. rewards of alternative investments.
A common consideration regarding alternative investments is that they can potentially be illiquid, possibly making them harder to sell or exchange. Yet, alternative investments are now considered a vital part of the modern-day retirement portfolio. These investments are generally uncorrelated with Wall Street products. While the funds tied to your alternative investment may not be available at a moment’s notice, they’re generally considered essential to create a truly diversified portfolio.
Another consideration is that the fees affiliated with alternative investments are typically higher than those of standard investments. However, there are reasons for the potentially higher cost. Custodians holding alternative assets undergo rigorous training and hold a plethora of knowledge. This type of training is usually not completed by administrators at your average brokerage. In addition, in a Self-Directed IRA, your gains will grow in a tax-advantaged account which can improve your overall return on investment. Also, some tangible alternative assets – like real estate and precious metals – can behave as a hedge against inflation, as they’ll likely never reach a zero-dollar value.
Alternative investments generally do not require as much regulatory oversight as traditional investments. It is considered best practice for all prospective investors to perform adequate due diligence prior to investing.
It’s also strongly encouraged that your alternative investment of choice is something you understand, as these investments tend to be complex structures. On the flipside, alternative investments offer unique and exciting opportunities that aren’t typically available on public markets, allowing you to invest in something you know and believe in.
Alternative investments are designed for those who have adopted a long-term approach. Because these assets can participate in distinct investment strategies, they have the potential to accrue higher returns than traditional investments, letting your retirement savings flourish.
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