By J.P. Dahdah, Founder & CEO of Vantage
IRAs are illiquid accounts by nature because they are long-term investment vehicles, making them ideal for holding illiquid private assets.
Do you remember the last time you felt triumphant vindication for an important choice you made in your life? Did it feel glorious? After every choice we make, our natural human desire is to gain validation that our decision was the correct one.
When we have a choice involving a topic as personal as money, the emotional stakes are high.
For most people, a choice proves to be the right one when it leads to the sought-after result. As usual, time plays the most significant role in determining whether the outcome was favorable or not, hence the famous saying “only time will tell.”
We tend to place elevated levels of emotional attachment to the choices we believe can profoundly impact our lives.
Retirement investment choices fall into this category for most of us. As investors, the decisions on how we direct our retirement savings matter greatly.
One of the fundamental investment choices every IRA investor must make is selecting asset strategies for their retirement portfolio.
Will you choose to invest in publicly traded securities offered through brokerage firms? Or would you instead invest in non-traditional private investments known as alternative assets?
Perhaps a diversified combination of both is preferred? We all have justifications that we feel support our choices.
One of the key differentiating characteristics between public and private assets highlighted frequently is the drastic variance of each market’s liquidity.
The public market offers a high level of liquidity through stock exchanges of buyers and sellers. Stock market investors who find themselves in a financial crunch and need money fast find value in having the benefit of having quick access to their funds.
Suppose we evaluate the liquidity factor within an IRA. In that case, the value proposition decreases given the IRA distribution restrictions and tax penalties imposed for early withdrawals.
Based on sound financial management principles, retirement accounts should serve as the option of last resort to tapping into cash-strapped investors. It is important to note that an indirect negative effect of stock exchanges’ liquidity is that it also facilitates increased market volatility.
As we find ourselves halfway through a year of uncertainty brought upon by the COVID-19 global pandemic, investors are asking, “Did I make the right investment choice with my IRA?”
Those of us who choose private assets are now experiencing that triumphant feeling of vindication.
Our current market conditions provide us an opportunity to prove that our illiquid asset IRA holdings are delivering the results precisely as we intended them.
They protect our IRA balances from the rapid downside risk exposure felt by investors of the public markets.
I encourage all illiquid asset IRA investors to take this moment to join me in rejoicing in the magnificent splendor of choosing wisely.
Happy Investing!
For more information on how you can discover your IRA investing alternatives contact us
You can also schedule a time for a call that is most convenient for you by clicking here.