With record-setting inflation rates and a volatile stock market, you may be looking for alternative ways to preserve and grow your retirement savings. Within any portfolio, hedging against inflation involves a few straightforward principles. First, look for investments that do not correlate (move in the same direction) with your assets. If your portfolio goes down, your non-correlated investments will likely go up. Next, look for investments with a heavy proportion of intrinsic value that isn’t as much influenced by the market’s behavior. Consider investments where you believe money must be spent, like infrastructure and commodities.
As we dive deeper into three inflation-friendly investments held outside of the stock market, keep in mind investors can leverage tax-advantaged accounts like self-directed IRAs (SDIRAs) to hold these investments and maximize a retirement portfolio diversification strategy.
1. Real Estate
Demand for homes is outpacing supply.
Real estate is a traditional hedge against inflation because it has tremendous intrinsic value as a tangible holding of limited supply. Tangible assets like real estate tend to maintain or increase in value over time, and spike during inflationary periods, making this an asset that should not be overlooked.
While the single-family market experienced a mass migration of people fleeing cities for suburbs and rural towns during the summer of 2020—no doubt a Covid -19 catalyzed housing boom—there are plenty of opportunities around. Demand for homes is outpacing supply and virtual shopping, e-commerce, and supply chain issues are still driving the demand for diverse industrial growth. SDIRAs holding assets such as REITS, warehouses, and/or raw land outside of the stock market offer significant tax advantages or tax-deferred growth (or tax-free if held in a Roth IRA) and profits that can create cash flow and potential upside for long-term market appreciation.
2. Private Equity – Infrastructure-Focused
Infrastructure-focused investments typically have relatively low volatility and low correlation with … [+]
The country’s infrastructure is somewhat of a never-ending operation, from general wear-and-tear to developments and renovations to restoring damage caused by natural disasters. We are currently in a phase of heavy development and renovation, and these infrastructure projects need funding – an investor’s options are many. Infrastructure-focused private equity investments raise capital outside of the stock market from Limited Partners (outside investors), then use that capital to invest in additional assets or operations. They resemble traditional private equity investments, but these investments include a focus on utilities, transportation, social infrastructure (hospitals, schools), and energy. …….