Self-Directed IRA and Alternative Asset Classes

With stocks breaking new record highs every week, and with yields on most bonds and annuities still stubbornly low, chances are good that diversifying into alternative asset classes could add some stability to your portfolio, help hedge against an inevitable end to the long bull market in equities, and even provide substantial potential for growth. And the Self-Directed IRA is an excellent vehicle for this type of investing.

Alternative asset classes are those that provided diversification benefit against stocks, bonds and cash, including, but not limited to:

  • Commodities
  • Market-neutral funds
  • Long/short funds
  • Private placement
  • Hedge funds
  • Real estate
  • Futures
  • Tax liens and certificates
  • Micro-lending
  • Private lending and hard money lending
  • Raw land
  • LLCs and partnerships
  • Master limited partnerships
  • Oil and Gas
  • Pipelines

And much more.

All of the above are perfectly legal to invest in using a Self-Directed IRA, self-directed 401(k), or self-directed SEP or SIMPLE, and each can stand to benefit from the significant advantages of the favorable tax treatment that retirement accounts offer.

Are alternative asset classes riskier?

Buying any asset at a price that is too high is generally riskier than buying an asset relatively cheaply. And there are alternative asset classes, such as real estate, futures and leveraged commodities that can be quite volatile. But this is not always the case, and some of these assets have price deviations actually far less than the historic performance of the stock market. According to information from Black Rock, the stock market had volatility of over 16 percent between 2001 and 2015.

Real estate was more volatile, in terms of the magnitude of price swings – especially for those who were heavily leveraged. But many alternative asset classes that Black Rock tracks were nowhere near that level of average volatility. And as real estate IRA investors are fond of pointing out, unlike stocks, which can become completely worthless overnight, real estate almost never falls to zero – even in the worst markets, you still have a house, or still have land.

Diversify with a Self-Directed IRA

By adding one or more of these alternative investment vehicles to your retirement portfolio, you may be able to take the edge off of any future stock market corrections, and may be able to boost the returns of your overall portfolio.

Liquidity and Alternative Assets

Some of these Self-Directed IRA strategies can be fairly illiquid. But illiquid investments frequently outperform highly liquid investments. That is, if you’re willing to commit your funds to an investment for a substantial length of time, you may be able to get a better return in compensation.

IRAs are ideal places for long-term money, since most investors won’t need this money for at least a few years. Investors willing to look at alternative asset classes in Self-Directed IRAs can afford to wait longer to access their money, in exchange for higher returns.

Specifics vary by investment types, with some ‘lockup’ periods as short as 30 days, and others as long as 10 years, in the case of some private equity fund investments.

American IRA, LLC is a third-party administrative services provider specializing precisely in these types of Self-Directed IRA and other self-directed accounts.

For more information, call us today at 866-7500-IRA(472), or visit our Website at