Setting up a new self-directed IRA with a custodian such as Quest Trust Company can be one of the best ways to retirement planning efforts to a host of new investing options. With a self-directed IRA you be able to move beyond investments in stocks and mutual funds, and explore asset classes that might be a much better fit to your investing personality and needs.
First things first – there’s not necessarily anything wrong with incorporating stocks and mutual funds into your retirement portfolio. These types of investments can be a great cornerstone for many individuals’ retirement portfolios.
The potential issues arise in that there are other individuals who want additional options – options to target other investing markets and potentially secure a much higher level of return for themselves. Let’s take a closer look at the self-directed IRA.
Real Estate. There are a variety of methods through which you can invest in real estate with your self-directed IRA. The most accessible type of real estate investment is probably the single family home. These may be the easiest real estate investments to manage yourself (assuming that you don’t want to incur the expenses of an outside professional).
But you can also use your self-directed IRA to invest in multifamily properties, farmland, commercial real estate, undeveloped land, or any other type of real estate interests that a non-retirement account investor has available to them.
Private Investments. The IRS rules governing IRAs also authorize account holders to invest in non-public assets such as private equity and private debt instruments. Depending on the nature of the investment, you may need to meet the definition of a “qualified investor”, but even non-qualified individuals can still make other types of nonpublic investments, including loans and mortgages.
One of the biggest challenges may simply be acquainting yourself with being able to find these types of opportunities. This is one area of investing in which the Internet can provide you with a great deal of useful information. A number of different private investment exchanges and clearing houses have come online in the past few years, and these can help you find suitable private investment opportunities for your self-directed IRA.
Precious Metals. In seeking to diversify beyond stocks and mutual funds, retirement savers often seek out investment asset classes that have a low correlation to the stock market – meaning that their prices do not frequently move in the same direction or to the same extent as publicly traded stocks. Precious metals can be a great way to gain this type of investment exposure.
Direct physical investments in precious metals are authorized with a self-directed IRA, provided that you have a third-party custodian actually hold the physical metals on your behalf. Among those who use their self-directed IRAs to invest in precious metals, the most common types of metals are gold, silver, platinum and palladium.
These types of non-stock investments are sometimes unfamiliar to retirement savers, so always be sure to do your research and understand the risks of any investment fully before committing any funds.