Diversification is a key component of any successful retirement strategy. There are many types of investments and asset classes that can provide value for retirement investors as a hedge against unwanted risks to their capital. When a portfolio is too heavily weighted to any one asset type, it exposes the investor to preventable losses during a market downturn.

Risk-conscious investors diversify across a broad variety of asset types to maximize returns and to shield their wealth during recessions.

Below is a list of investment types that can be added to retirement portfolios, including IRAs and 401(k)s, to better manage risk and build lasting, resilient wealth:

 

Secondary Market Annuities

In a world full of risky financial assets constantly fluctuating in market value, annuities are comfortably boring and secure. Annuities and secondary market annuities (SMAs) guarantee income of a specific dollar amount until death, like a pension or government retirement benefit, or for a defined period of time independent of stock market swings or variations in federal interest rates.

In 2020, annuity sales totaled $58.6 billion in the U.S. alone, a 2% rise from the year prior. Now more than ever, risk-conscious investors are turning to income annuities to craft a retirement strategy with peace of mind.

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Hedge Fund Investing

Hedge funds are professionally managed investment funds that look for profitable relationships between risky assets. Hedge fund investing incorporates both long and short positions in many asset types, including stocks, bonds, commodities, and derivatives to generate measured returns for investors.

Global assets under management by hedge funds totaled over $3.8 trillion in 2020. Owing to their highly leveraged investing strategy, hedge funds are able to take on riskier bets and enhance overall returns. The resources available to hedge funds enable high-growth investing strategies that have fueled their rapid ascendency—in the 2000s alone, capital committed to hedge funds grew 17% year over year.

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Real Estate Investing

Real estate investing involves the purchase, management, rental, or sale of physical land and buildings on the land in order to turn a profit. Like any other asset class, real estate investing encompasses various risks and rewards that make it a potentially lucrative option for investors.

The demand for real estate has been steadily increasing for over fifteen years. According to the National Association of Realtors (NAR), existing home sales skyrocketed 10.5% YOY in Q2 2020. There’s no denying that the U.S. real estate market is hot, and savvy investors would do well to get in on the action in order to diversify their investment portfolio.

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Precious Metals Investing

Precious metals investing is an increasingly popular form of wealth-building and risk management for American investors. In 2020, 16% of U.S. investors owned some form of precious metals investments and U.S. imports of precious metals reached a 19-year high.

In years past, the average American investor was limited to stocks, bonds, and mutual funds by brokerage firms. Fortunately, these days the rise of self-directed IRAs and 401(k)s have broadened investors’ selection of asset types. These include physical precious metals such as gold, silver, and platinum-group metals like rhodium or palladium.

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Annuities Investing

Retirement investors are often interested in seeking out safe, blue-chip investments that offer guaranteed returns, hence the appeal of bonds and Treasury bills. However, another lesser-known type of fixed-income asset can provide even more impressive returns while offering comparably low levels of risk—annuities.

Annuities investing has become more and more popular in recent years among risk-conscious investors. Rather than securities, these assets are, in fact, a type of written contract that guarantees the delivery of predetermined payments over a long period of time. In most cases, these payments continue until the annuitant’s death.

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Cryptocurrency Investing

Since the launch of Bitcoin in 2009, the cryptocurrency market has grown into a massive $2.4 trillion global industry. Bitcoin’s rapid rise from an underground cyberpunk project to one of the world’s most in-demand commodities has caught the attention of everyone from J.P. Morgan Stanley to regular mom and pop investors saving for their retirement.

Cryptocurrency investing has taken the world by storm. However, many investors haven’t yet caught on to Bitcoin and are wondering what it is, and whether it’s right for them. And, given the blistering pace of the crypto industry, we can’t blame them.

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