What Are the Investment Alternatives in a Bear Market?

In times of economic turmoil, people may feel they need to wait to open a self-directed IRA. Some say they are hesitant to move forward until the market stabilizes. Others want to leave money in their stock account until they “recoup” their losses and get back to where they were. We aren’t saying those are good or bad ideas. But what are the investment alternatives you can take advantage of in a bear market? This article addresses that question and explains why many people invest in alternative, tangible assets during a turbulent economy.

If you invest in tangible assets in a turbulent economy, you have the potential to offset market losses and continue earning retirement income.

What are the investment alternatives in a bear market? Rental property is one example.

Below are snippets of conversations we’ve had recently. Hopefully, these thoughts cause you to consider all of your options. If you want to invest in alternative assets—don’t let economic uncertainty prevent you from taking control of your retirement funds and missing a good opportunity to grow that wealth.

These are questions that have been asked by individuals who want to know if now is the best time to open a self-directed IRA.

Should I wait for the stock market to stabilize?

Well, consider this: in 2020, when COVID-19 became a household term, we experienced the largest stock market drop since 1987. As of the date of this writing, just this week the stock market plummeted low enough to send us into the first bear market we’ve had since 2020. Additionally, the Federal Reserve raised interest rates by a whopping .75% to help slow down rising inflation. This is the highest percentage rate they have imposed since 1994, and it will take quite a while to produce a positive impact for Americans.

So, you are in a potentially bad position right now because of these factors, yet you are relying on it to make you feel good again? And, who knows how long that may be, or how many additional hits it’s going to take from today until you retire?

And, for the sake of this conversation—if the market goes down by, let’s say, 25 percent, then it must go up by 50 percent to get you “back.” You hope. Maybe more, maybe less. But, either way, just how long is that going to take? Nobody knows. And you still haven’t asked yourself this question: What are the investment alternatives to the stock market that may help build and protect the wealth in my portfolio?

The good news is there are other investment strategies that have the potential to get you ahead quickly without the same risk during a catastrophic market setback.

There are many potential opportunities you’re missing out on right now that start appreciating the minute you buy in (like real estate) that can increase your odds of financial security in retirement.

The stock market is truly just a numbers game and is wholly dependent on many factors across the globe. There is no way to predict or (legally) control it.

This is why you need alternative investments to the stock market—to hedge any losses so you don’t have to wait any period of time to recoup them like you do if your investments are all on the market.

What are the investment alternatives that weather a volatile economy?

Tangible assets like real estate and gold can provide diversity that can protect you from the stock market’s storms.

Real estate historically retains value. Even if the housing market crashes or rent dips a bit, rental property can still net income. People always need a place to live. Investing in multifamily deals and larger projects can also give you good returns. The more units you rent out, the less impact you suffer if you have a few vacancies from time to time.

And consider gold, along with other precious metals. Gold and silver may zig and zag in price from time to time, but those metals are always worth something. They never lose their whole value. Your investment doesn’t disappear if the major stock indices drop 3000 points in a day.

How long do you think it will take for the market to stabilize?

So, this is a question that’s akin to the bad ex-boyfriend/ex-girlfriend that you keep going back to. When will it end? And the answer is—who knows? The market’s stability, again, depends on so many things, and during today’s economic turmoil, propelled by skyrocketing inflation and interest rates, it’s anyone’s guess.

But the bigger question is—does it even matter? Not to be harsh, but that’s a reality. Can you wait that long? If your strategy is to wait until markets stabilize, to wait until you recover your losses, at what point will you feel satisfied with what’s happened?

What if you took control now and didn’t have to worry for the next 12 months?

Let’s be real. It’s not all about alternative investments. We aren’t suggesting you jump off the market altogether. We believe diversity is essential. True diversity that is found by investing in alternatives like private equity, startups, real estate, gold, private lending, or whatever you know and understand. But you can also go for stocks and bonds. The thing is—you can invest in all of that with self-directed IRAs. Traditional assets are permissible in these accounts, too.

Your Takeaway

COVID-19 caused our last stock market meltdown. Inflation, rising interest rates, and global economic factors are contributing to its volatile state today. But, once it is under control, what about the next disease, war, natural disaster, or another spike of inflation, etc., that sets markets back again? The plan to simply “wait until the market recovers and gets back to where it was” only works if there are no other disruptions once the current crisis moves along.

So, we ask you to ask yourself, us, or others, “What are the investment alternatives available besides stocks and bonds?”

You need to know there are strategies you can use right now that can bolster your financial situation for years to come.

So, consider investing in things you know and understand—things you can somewhat control.

We are really talking about investing in yourself. Your future self. And, to do that, you must cut out the fear and make bold moves to achieve the financial security you deserve. And, in today’s climate, you don’t have to break the bank to do that.

If you have questions about how tangible assets can help you build and protect your retirement wealth, contact Advanta IRA. We enjoy introducing people to self-direction and explaining the nearly limitless options you can invest in using a self-directed IRA.

Additional reading:

What Are Stock Market Alternatives for IRAs and Other Investors in 2022?

How Safe Are Your Retirement Savings When Stocks Tumble?

Gold IRAs: How to Invest in Gold in a Self-Directed IRA

How to Invest in Real Estate with an IRA: A Beginner’s Guide

 

This article was first published on April 9, 2020 but has been updated to include current information.

 

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About Scott Maurer

Scott is an attorney and a graduate of the University of Florida Law School. Scott started his career with Advanta IRA in 2006. His experience with various investment types and their unique processes makes him an invaluable asset. Scott holds the designation of Certified IRA Services Professional (CISP) and leads engaging seminars and webinars that educate the public on the intricacies of self-directed IRAs.