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Diversifying your Roth IRA into non-conventional asset classes can result in fast growth and risk aversion
Karen Zuba
May 22, 2007
When you invest your Roth IRA, you must make sure you strike a harmony between adequate growth and risk aversion. Diversifying your Roth IRA into non-conventional asset classes can result in fast growth and protection from market volatility and downturns.
Smart investors are securing their early and secured prosperous retirements through these non-conventional Roth IRA investments. Because Roth IRA is transferable to your next generation, once you master the technique of growth and hedging, you can pass the secret to your heirs.
One such non-conventional asset class is the real estate. REIT (Real Estate Investment Trusts) provides excellent conservative return. A more mathematically prudent asset class is commodity arbitrage using futures, and call as well as put options. Commodity arbitrage can provide 100% return on your investments if you understand the mechanism of money management in volatile environments.
One thing you should avoid is buying options. On the net, you should be writing option. Always keep time on your side. Remember, 90% of the time a commodity really sits there doing nothing. Only 10% of the time it moves. However, when it moves, it moves violently. Buying a future on a commodity, writing an in the money call and buying a very distant out of the money put is a great strategy. Part of the premium you get, can be reinvested in buying some distant call spreads six to twelve months far out in commodities that is washed out in down markets.
An example is lumber. Lumber is in a bear market since the downturn in real estate started. It bottomed around 230 and then rallied. Today it went limit up. Those who adopted the strategy spelled out above doubled their margin money in their Roth IRA.
Using this strategy you can aim 150% gain on yore Rot IRA every year. However, please remember the basic money management principles – do not allow drawdown below 15% of your capital in any Roth IRA account.
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