How Self Directed IRAs Can Help Protect You From Stock Market Crashes and Halted Trading on Exchanges
I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years. – Warren Buffett
If you were paying attention yesterday, then you probably heard that the New York Stock Exchange (NYSE) halted trading for 3.5 hours and Chinese stock market continue to crash. So much for Wall Street having a lazy summer.
Should you worry about these events?
Yes… and No.
As of today you should not have much to worry about… unless you have money in Greek banks, then you are allowed to sweat. While you may not have much to worry about today, what if these events were more pronounced? What if they impacted your investments in a more direct way? What if the Greek crisis causes stock markets to crash. What if the stock market closed and didn’t reopen for 5 years? Would you be happy with your investments?
Warren Buffett has made a statement in the past that investors should invest as if the stock market would be shut down and not reopen for the next 5 years. What companies would you want to hold in this scenario? Would you want to hold stocks at all?
Lets take that concept a step further. Do you have 100% of your retirement funds in mutual funds, stocks, or bonds? If so, then why? Is it because you want to invest in the stock market? Or is it because you are not aware that you can invest outside the stock market? If it is the later, then you are in good company. More than 80% of the investing public is not aware that they can invest their IRA outside the stock market. Less than 10% is actually investing in alternative investments with their self-directed IRA or self-directed 401k.
Are traditional investments better than alternative investments…