While many people who invest for retirement through an IRA or 401K plan have been historically limited to what they could invest those funds in, new tech platforms are increasingly making it possible to diversify your portfolio beyond traditional assets like stocks and mutual funds. Investors are increasingly adding alternative assets classes to their retirement accounts including real estate, private equity and even cryptocurrencies. This democratization of finance could allow more mom-and-pop investors to have access to opportunities (and returns) that were previously exclusive to wealthy investors and Wall Street firms.
The significance of this is important for all investors to pay attention to, especially as diversification plays an ever-growing role having peace of mind in a retirement strategy during turbulent times, such as pandemics. Adam Bergman is the CEO of IRA Financial, a leading platform that provides IRA and 401K plans that are able to be used for investing in a variety of alternative assets. We caught up with him for insight on what investors should know if they are considering diversifying their retirement account into areas such as crypto or real estate.
Grit Daily: Will we see a pivot in financial and retirement planning post pandemic, if so where and what are you seeing in the current market?
Adam Bergman: As a provider of self-directed IRA & 401(k) and Solo Roth 401(k) plans nationwide, we’ve definitely seen a surge of investors looking to diversify their retirement assets into hard assets such as real estate in light of the equity market volatility. We’ve also seen a boom in young retirement account holders looking to gain access to the emerging asset class of cryptocurrencies.
Grit Daily: Are there asset classes you think will grow in popularity with the rise in the gig economy and freelance/consulting?
AB: Yes – as people gain more control over their work life, they will also have control over their retirement investment decisions. We have over 9,000 solo 401(k) plan clients that appreciate the ability to make high annual 401(k) plan contributions as well as gain the ability to make traditional and alternative asset investments with their retirement funds. Equities, real estate, cryptos, and crowdfunding investments have been the most popular.
Grit Daily: With the crackdowns in China should Crypto and Bitcoin be part of your strategy?
AB: I believe every American should have some exposure to cryptocurrency. I believe the reward far outweighs the risk of owning cryptos. The amount to invest will greatly depend on one’s net worth and appetite for risk.
Grit Daily: Are there certain alternative assets you recommend as we come out of CV19?
AB: Definitely cryptos. Real estate has also become a more of a popular alternative asset after COVID where investors are looking for a hedge against inflation and also are seeking steady cash flow.
Grit Daily: As an expert what do you think we can see happen in people’s financial planning in the next 2 years?
AB: I think we can expect to see continued movement towards alternative assets, specifically in retirement accounts as a source of diversification. I also believe younger investors will continue to push for more exposure to cryptocurrencies and pre-IPO private company investments. Traditional equity investments, such as ETFs and individual stocks, will continue to be a main part of individual’s investors investment strategy, but I believe alternative assets will grow in its percentage of allocation for individual investors, from real estate for more mature savers looking for appreciation and cash flow to cryptos and private company investments for younger investor looking for more growth and risk.