Self-Directed IRA – Do Time-Tested Investing Principles Work?

There are some words of wisdom out there that are repeated so often they border on cliché. “Buy and hold for the long-term.” “Don’t let short-term adversity in the markets throw off your plans.” “Buy low, sell high.” Many of these time-tested investing principles hold up—but do they hold up only in the traditional means of investing in retirement: the stock market and bonds? Or might they also hold up when you consider the types of investments you can use in a Self-Directed IRA?

To answer these questions, we’ve decided to look at a few of those age-old words of wisdom and see how they can be applied within a Self-Directed IRA to ensure success no matter what kind of investments you have in your portfolio:

Using a Self-Directed IRA to Stick to Age-Old Principles

  • “There is no such thing as short term investing.” Is this true? It depends on who you are—and how long you’ve been around. For some people, especially those closest to retirement, short-term investing should be a portion of your portfolio…especially if you have a keen eye on establishing a retirement income for yourself. Real estate that generates rent is a way of short-term investing for immediate and regular returns. But even short-term investors will want to keep a portion of their portfolio reserved for the long-term, even in real estate.
  • “No risk, no reward.” This holds up with Self-Directed IRAs as it does anywhere else. The Self-Directed IRA is not a get-rich-quick scheme with zero risk. All investments have risk. But there are some protections afforded by keeping money within an IRA. For example, the use of non-recourse loans within real estate investments in a Self-Directed IRA ensures that a lender can’t come for all of your goods when you default on a loan.
  • “Diversification means cash, bonds, and a lot of stocks.” Does it? Diversification is really a relative term. A person who owns two stocks is more diversified than someone who owns one. Someone who owns international and domestic stocks is more diversified than someone who owns only domestic stocks. But there’s more to diversification than just stocks—otherwise they wouldn’t call it diversification. Other asset classes like real estate and precious metals should be considered essential to achieving true diversification.
  • “Knowledge is power.” This is true. But it’s also tricky. There is bad knowledge—insider trading is illegal, for example—and there is good knowledge, such as the knowledge of different retirement account types. Self-Directed IRAs are often used by people who understand how to leverage good knowledge, which is an awareness of all of the options that are available to them.
  • “Investing is like the weather. You have an idea, but you’re never sure where it will go.” This is actually an apt analogy. We have some idea of where the climate is headed, but we have trouble predicting the day-to-day variance in the weather. That’s a little like investing. We know that stocks tend to go up in value over time, but we can’t say for certainty whether the stock market will finish up or down on the year. That’s why it’s important to keep your retirement nest egg protected from short-term downturns in the market as well as prepared for keeping your long-term wealth growing at a stable rate. Some days and some years may be better than others, but if your knowledge and actions are both sound, you’ll stand to grow over time.

If you want to learn more about using a Self-Directed IRA, keep browsing our site here at or get in touch with us at 1-866-7500-IRA(472).