How Can I Stop My IRA From Losing Money?
An Individual Retirement Account (IRA) gives you access to a wide array of investment opportunities; however, some could result in losses.
An inevitable part of investing, losses are inevitable in an IRA account. There are, however, ways you can minimize losses in your IRA.
Diversify Your IRA Portfolio
For your IRA to avoid losing money, it is crucial that its investments be diversified. To maximize returns during difficult markets, diversifying holdings across industries and companies of varying sizes is ideal – this reduces the likelihood of any one security or market sector losing value, and increases chances of growth during periods of downturns. Index mutual funds or ETFs could form the basis of your portfolio as an ideal place to begin diversifying.
Take advantage of professionally managed portfolios, which offer a diversified mix of securities for an economical cost, then add further assets according to your age and risk tolerance. Lastly, to further lower investment risks consider shifting some holdings to an IRA fixed index annuity; this will keep them out of the stock market altogether while still earning interest through compound interest earnings.
Rebalance Your Portfolio Regularly
Rebalancing your portfolio involves selling assets that have gained too much and purchasing investments from underweighted asset classes in order to reestablish the original target allocation. This could involve selling stocks that have increased significantly while purchasing investments with declining values such as bonds or even just decreasing proportion of one asset class (such as stocks). Rebalancing is essential to successful investing and especially important when managing an IRA account.
Many IRA owners are reluctant to rebalance, yet doing so can prevent them from losing money when the market decreases. Rebalancing can also help ensure their portfolio matches up with their investment goals and risk tolerance, and is especially useful if withdrawing money to cover expenses such as housing or medical costs; generally speaking, you should first withdraw funds from those holding losses before withdrawing those with gains – these might provide better security during withdrawal.
Monitor Your IRA Account Carefully
Your IRA is designed to hold various forms of investments, from stocks and bonds to mutual funds and exchange-traded funds. When these securities change in value, your account balance may change accordingly – this shouldn’t necessarily be seen as negative; in fact it may help you find more lucrative investments!
As part of your IRA account management, it’s vitally important that you stay abreast of market changes so you can quickly take necessary actions should necessary. This is particularly relevant during market downturns when your investments may decrease in value and risk losing money if they drop.
Always pay careful consideration to fees and commissions; excessive payments could mean losing out financially on your IRA investment.
It may also be wise to change providers if you are dissatisfied with your current one, which can usually be completed quickly and painlessly. Schwab is a top choice among IRA investors as it provides thousands of no-transaction-fee funds and commission-free trades as well as numerous services that make your experience with an IRA smoother.
Get Help from a Licensed Financial Professional
Assure yourself of success by using SmartAsset’s free advisor matching tool and diversifying your portfolio, carefully monitoring fees, investing in safe assets and delaying early withdrawals. In addition, use our tool SmartAsset Advisor Matcher to find professional advisors in your area who may help.
Financial professionals can assist in tailoring a plan that best matches your long-term goals and risk profile, and explain differences between traditional IRAs, Roth IRAs, savings accounts versus investment accounts and SEP IRAs for self-employed individuals.
As you approach retirement age, it may be prudent to invest more of your savings in safer investments such as bonds. When buying bonds, you are lending money to corporations or governments which promise to pay you back with interest in return. This can help protect your IRA against losing value as stocks fluctuate – however it’s important to remember that stock markets cannot be controlled directly.
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