Using Self-Directed IRAs As a Vehicle Towards Higher Returns
As the economy continues to grow out of the hard-hitting recession, a growing number of investors are seeking alternative investments that can offer stronger returns for their IRAs. Unfortunately, most of the largest brokerage firms and IRA custodians do not allow their clients to participate in alternative investments. This leaves the large majority of investors constrained to the most standard of investments (publicly traded stocks, bonds, mutual funds, etc.).
Theoretically speaking, all IRAs are “Self-Directed”, meaning each person has control of what investments their IRA purchases. However, the reality of the situation is that mainstream brokerage firms and custodians will not hold anything but the mainstream investments. This eliminates just about every alternative investment option out there; including real estate projects, private stocks, REITs, joint ventures, and real estate investment funds such as A List Partners REI Fund I.
All investments involve risk, but alternative investments like real estate projects and real estate investment funds have a tangible product that can be much more easily understood than intangible investments such as stocks and bonds. There is a level of control with alternative investing, which helps to curtail risk, that simply cannot be found in your mainstream investment vehicles. If you buy 100 shares of stock in Ford Motors, and you wake up tomorrow to find out Ford’s CEO has decided to start making stuffed animals instead of vehicles, there is nothing you can do to control that risk.
Ultimately, the volatility of Wall Street and the impact of the recession has created a surge of investors moving to self-directing their IRAs and becoming more educated on all of their investment options.
To educate yourself further on Self-Directed IRAs, a good place to start is here. As always, all investors should speak with their accountant and/or financial advisor beforehand to decide which form of IRA will best meet their goals.
If you’d like additional information on real estate investment funds and various other forms of alternative investments, reach out to any of the A List Partners team members and get the conversation going!