Three reasons why you should have been investing in your own self-directed IRAs all along
“Get a job. Buy a house. Invest in the stock market. Listen to money managers and only money managers.”
Rinse and repeat.
Most of us have been so exposed to this spit of “common” advice that we don’t know any other way to think by now. It is a pity. And when only two percent of the $4.8 trillion in IRAs is put into self-directed IRAs, it’s obvious that most people listen, rinse and repeat, and do little else to protect their retirement.
But what if the usual rules, which may work for many, aren’t really good advice for you and your specific situation? In that case, you may be in for a rude awakening: Self-directed IRAs might have been your best option from the start. Here are three reasons why this could be the case.
Reason #1: Expanded Investment Options Work Better for Smart Investors
Self-directed IRAs are ideal for people with investment experience, especially if your area of expertise is outside the traditional IRA boundaries.
For example, self-directed IRAs may allow you to invest in real estate, precious metals, private companies, intellectual property, and the like. Frequent real estate investors may have much better luck setting aside money for retirement when their IRA works within their realm of expertise.
This is not to say that traditional investing in index funds, mutual funds, and the stock market is worthless. Instead, a self-directed IRA “opens up” a wider range of possibilities than traditional channels. This gives you more options to direct your own future and the financial destiny of your family.
Reason #2: Invest in what you know, instead of relying on experts
Many people make their money by investing wisely in a specific category, but it’s not always the type of investment that traditional IRAs allow. If you know real estate, a self-directed IRA can allow you to invest in real estate, generating a return on investment without relying on the success of the stock market.
However, there is more out there than just real estate. Investments in private companies are also popular in self-directed IRAs. Many investors who have worked primarily through these investments find that a self-directed IRA gives them the freedom to set aside retirement on their own terms.
What is the alternative that most people live with? Put your investments in the hands of experts—experts you rarely meet. Money managers and fund managers often give their clients a return on investment, but not without charging a fee for their trouble.
Reason #3: True portfolio diversification
“Diversify, diversify, diversify.” It is the “location, location, location” of the investing world. However, many of the same people who tell you to “diversify” don’t recognize that all your money is in one place: the stock market.
What about true diversification? What about precious metals? real estate? Intellectual property? True diversification separates your investments from the changing winds of the stock market and allows you to feel secure while casting a wider net than traditional IRA investors.
If, at this point, you’re criticizing yourself for not investing in a self-directed IRA, don’t worry. Fortunately, it’s not too late to invest on your terms.
