By J.P. Dahdah, Founder & CEO of Vantage
The very nature of investments means risks are inevitable. And, as you might expect, higher-risk investments often have the potential for a higher return. But higher risks also mean a higher potential for loss whether the investment is a traditional or an alternative asset. And while risks are unavoidable, especially when it comes to your property investments, you can minimize your risk exposure.
How? The answer is DIVERSIFICATION!
The idea is simple. Imagine there are two investments, A and B. A and B respond to certain risks differently. A good example would be the location. Imagine yourself owning commercial spaces for rent. Your investment in Location A is doing well, like your investment in Location B. But by a sudden turn of events, such as a regulatory change in the investment climate in Location A, the price of rent could go so high that people in the neighborhood would rather leave and go somewhere else. This would mean bad business for a Self-Directed IRA. But with your property in Location B doing so well (and it is possible that the people from A would go to B), you only lose a little from investment A—which your gains in investment B may even cover loss! And while you can never eliminate your risk exposure, you can certainly reduce your exposure with well-directed diversification.
For more information on how you can discover your IRA investing alternatives, contact our team at (866) 459-4590 or ClientService@VantageIRAs.com.