By J.P. Dahdah, Founder & CEO of Vantage

With another year behind us, it is essential to review your IRA investment.

To ensure that your holdings can produce your desired results, evaluate if you should consider any adjustments to your IRA investment.
Public markets continue to experience a forecast of less than favorable conditions for the year ahead. Investors who direct their IRA into privately-held alternative assets should help inject more stability into their retirement portfolios.

But which alternative investment strategies should you consider in 2019?

Alternative fixed income strategies are where the smart money will be placing their bets.
To put it another way, private lending opportunities. Your IRA is the instrument extending credit to borrowers willing to pay interest for the capital they need. You can accomplish this with a private fund company specializing in credit-based strategies or doing it directly on your own.
Before going further, I want to clarify that in no way should my opinion be construed as providing financial advice of any kind. I am merely openly sharing my insight as a fellow alternative investor. I hope that it may provide value in helping you make your own informed decisions with your money.

The way I see it, we are nearing a market cycle shift.

The Fed anticipates rate hikes for 2019, which will negatively affect bond yields, which will hurt any retirement portfolio holding traditional fixed-income allocations.
Most Americans don’t typically invest in individual bonds but rather do it through bond mutual funds.

You can determine how much of your overall retirement portfolio should be in the “fixed income” bucket by your age, risk tolerance, and time horizon. Suppose you are a baby boomer, for example. In that case, the chances are that you have heard that a prudent fixed income allocation for you is anywhere between 45-60% of your overall retirement savings. So, assuming your IRA is holding bond mutual funds, you should be anticipating a compression of yield from that portion of your portfolio.

I expect traditional bond yields to be below 3% and remain there for at least the next three years, which will not keep up with inflation. More attention should be on those who are already living off the income from your IRA.
Can you afford to maintain your lifestyle if your IRA’s fixed investment returns drop to those levels? Probably not. An alternative fixed income asset selection should be considered a hedge and proactive move against the upcoming 2019 market conditions.

Private notes are increasingly becoming the alternative investment of choice for our self-directed IRA account holders.

Private lenders identify creditworthy borrowers willing to pay interest rates between 8-12% annually. Well above what the stock market fixed income options produce.
Keep in mind that the safety of the debt instrument you invest correlates directly with the quality of the security used to protect it in the event of a default by the borrower. The most common private lending strategy used within Self-Directed IRAs is real estate-based secured notes, also known as trust deeds.

You can structure private notes in many different ways, for various objectives, and with many security options. Be sure you do your homework before entering any private note investment purchase.
I also encourage you to seek experienced legal counsel to help protect your IRA’s interest throughout the promissory note agreement and documentation.

No one has a crystal ball, including myself.

I am not trying to predict exactly when the market cycle will officially turn for the worse. I want to protect my money as much as possible, and I assume you do too. As the old saying goes, “it doesn’t matter how much money you make; it only matters how much money you keep.” Many investors have made a fair amount of money in this last bull market, so it’s time to be prudent and not greedy.

Looking for opportunities where your IRA can play being the bank could be the winning strategy heading into turbulent times.

Happy alternative investing.

If you haven’t considered investing in alternative investments, now is the time to explore your options. Contact us to see how we can help protect your future through Self-Directed IRAs.