How to Do Your Due Diligence with a Self-Directed IRA

Avoiding fraud might not be the most pleasant concept in the world of investment. But when you’re running your own Self-Directed IRA, it’s absolutely critical that you protect yourself from fraudulent scams and investment schemes.

Fortunately, it doesn’t have to be a major obstacle to investing with a Self-Directed IRA. You only need vigilance and a little bit of know-how to avoid fraud and keep your investments safe. Here’s how.

Why Fraudsters Sometimes Target the Self-Directed IRA Market

When you have the amount of freedom afforded to you in a Self-Directed IRA, that sometimes becomes interesting to people who want to commit fraud. A fraud promoter with an illegal investment knows that people with Self-Directed IRAs have some amount of money and some amount of flexibility with that money.

Ponzi schemes, frauds, and other illegal scams may sometimes try to take advantage of people with flexible investment options by presenting them with a “sure thing” or a “precious opportunity.” But if you know what you’re doing—and you know a little bit about the world of Self-Directed IRAs—you should have no problem sniffing a scam from a mile away.

Avoiding Fraud in a Self-Directed IRA: A Brief Guide

“Due diligence” is a phrase that gets thrown around a lot, but with little regard to its meaning. Investment writers say “do your homework” and then leave you to fill in the blanks for yourself. But what should you research? How do you know when an investment scheme reeks of fraud?

Here are some of the most important variables you’ll want to watch out for:

  • Know the “custodial responsibilities” of a Self-Directed IRA First, you have to know exactly what it is that a Self-Directed IRA Administrator like American IRA actually does. It’s not our job to tell you where to invest your money, or to give you investment advice. According to a 2011 report by the SEC, “Investor Alert: Self-Directed IRAs and the Risk of Fraud,” a Self-Directed IRA custodian’s “are responsible only for holding and administering the assets in a Self-Directed IRA.” If you’re getting told otherwise, then it should raise some significant alarms.
  • How much information are you getting? A Self-Directed IRA administrator will make all of your various options and limitations known. The reason? They’re not making the investments for you! They don’t necessarily want to steer you toward precious metals or private equity. Because Self-Directed IRA investors can invest in everything from real estate to tax liens, a Self-Directed IRA administrator who only tells you about one single investment source is highly suspect.
  • Keep an eye on the rules. “Due diligence” sometimes refers to good, old-fashioned reading. Read up on all of the rules that pertain to Self-Directed IRA You can access plenty of great resources right here on our website, reading up on types of IRAs for example, but even we encourage you to get as well-rounded of information as possible. If you’re getting your information from only one source, you can sometimes be manipulated into an investment. Avoid anyone who’s looking to get you to make a particular investment with a Self-Directed IRA. After all, their advantage is in the freedom they allow you.

What Should You Do Moving Forward?

Once you have a solid idea of what to watch out for, you’ll also want to take on some good habits that will keep you clear of fraudulent schemes. We have a few tips for anyone who wants to keep their account on the up-and-up:

  • Be sure to double-check on your investments as reported on your IRA account statements. It’s tempting to let your statements go to the paper shredder when they don’t hold much new information. But use these opportunities to verify that your account really does hold what the statements say they hold. You may have to do a little research on your own to fully make sure that the holdings you keep in this account are accurately assessed on each statement.
  • Stay wary of any unsolicited offers that come your way. Seeking out opportunities on your own is great. Finding opportunities through hard research is great. Getting approached out of the clear blue sky with a fantastic opportunity? Well, that deserves a little bit of skepticism. To make sure that your investments are really rock-solid, you’ll want to verify everything about them, true. But it’s also important to remember where these opportunities came from.

If you’re interested in learning more about Self-Directed IRAs and your options—as well as what a legitimate Self-Directed IRA Administrator actually does—we’ll be happy to answer your questions. Keep reading our site here at or call us at 866-7500-IRA. We’ll be glad to talk to you about what we actually do and how investors can best protect themselves.