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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