It’s sometimes forgotten that with a self-directed IRA, people can invest in pretty much anything. While there are exclusions in what you can invest in, technology definitely isn’t one of them.This last year, the technology sector has delivered some of the best returns since the recession in 2008, and while these stocks have the potential for high returns, some of the risks might be too high for some investors. But with that said, there isn’t a sector or stock that doesn’t involve some potential risk, because unfortunately, nothing is foolproof.
If you’re the type that pays attention to market trends, or even if you’re a casual listener of APM’s Marketplace (shoutout to Kai Ryssdal), you’ve been hearing lately that tech stocks, like Apple (AAPL) or Google (GOOG) have had a pretty good year. Using Apple as an example, they has improved earnings per share by 38.0% in the most recent quarter compared to the same quarter a year ago. Not only are things going well for Apple, but the tech sector as a whole.
These days, individuals and businesses alike can turn to the crowd for support in their entrepreneurial endeavors. And if you’re part of the crowd that’s always wanted to invest in a startup, you may soon be able to in ways that you couldn’t before. In 2012, the Jumpstart Our Business Startups (JOBS) Act was signed into law by President Obama. The Act requires the SEC (Securities and Exchange Commission) to write rules and issue studies on capital formation, disclosure and registration requirements. The SEC recently voted to approve crowdfunding rules for investors, an effort spawned by the passage of the JOBS Act from 2012. What that means is that startups or small businesses looking for investors can go through brokers or online platforms to find them—and those investors can now be, well, anyone. This new ruling combined with a self-directed IRA is the perfect opportunity to now only grow your nest egg, but diversify as well.
In the investing world, it’s a good idea to remember the term “risk vs.reward.” Stocks with a higher reward will most likely be more risky than stocks with very little risk, which usually yield very little growth. Having a good balance of low, medium and high risk investments allow you to maximize your reward while keeping your portfolio safe.