Self-Directed IRA

Diversify into Alternative Asset Classes with a Self-Directed IRA

If you opted out of alternative investments and Self-Directed IRA approaches in favor of just taking long positions in conventional IRA investments, 2018 was not your year. Equities have had a great run: The bull market that started in March of 2009 – when everyone hated stocks and blood was running in the streets – was the longest in U.S. history.

But every bull market ends, and as 2018 came to a close, we saw that the bear still has the power to seriously maul the unwary, uninformed and undiversified at any time.

This is why we have always been big believers in diversifying retirement investments into what investment professionals call “alternative” investments.

These are not necessarily exotic derivatives or highly-leveraged commodity positions – though these certainly have their place in an economy. Alternative investments are simply investments selected because they have a low historic correlation to the broad U.S. stock market – while still offering value and a reasonable expectation of a return commensurate with the risk.

No, we do not advocate the complete abandonment of long positions in conventional IRA assets like stocks, bonds and mutual funds. These are important building blocks for most individual portfolios, as they align with the general positive direction of the economy of the greatest country in the world.

But stocks are volatile by nature – as are many bonds, other than those on the very short end of the spectrum. Exposure to alternative asset classes can help add balance to your overall retirement portfolio, so that when the bears come to Wall Street, you have got a sizeable portion of your portfolio away from the bears, over on Main Street.

What are these alternative asset classes? There are thousands of possibilities, but here are just a few of the types of investments our own clients commonly hold within their own self-directed retirement accounts:

  • Rental real estate (both residential and commercial)
  • Hedge funds
  • Private equity
  • Gold and precious metals (select coins and bullion of consistent high purity – call us for details)
  • Closely-held corporations
  • Private debentures
  • Crowdfunding initiatives
  • Partnerships
  • LLCs
  • Tax liens and certificates
  • Land banking
  • Farm and ranch land
  • Mortgage lending
  • Private lending
  • Trust deeds
  • Property flipping
  • Structured settlements

Setting up a Self-Directed IRA with American IRA makes it easy for you to make these investments, gaining valuable diversification for your portfolio, while still retaining the benefits of tax-advantaged retirement accounts.

For example, if you are concerned about current income tax rates or paying capital gains taxes on highly-appreciated stock, you can do so using a Self-Directed IRA or Roth IRA without having to worry about current tax liability

Note: There are some exceptions to this favorable tax treatment if you are employing leverage within a Self-Directed IRA or other retirement investment – if you hold a mortgage or other debt within an IRA, you may be liable for unrelated debt-financed income tax on the portion of any gains or income attributable to money you borrowed, but not to those attributable to your own money. For more information, contact your tax professional).

American IRA can help you set up either a traditional or Roth IRA, or both, for your retirement portfolio. These can hold new contributions, or you can roll funds into a self-directed Traditional IRA from 401(K) accounts or other IRAs.

Many of our clients who are self- employed or who own their own corporations or LLCs establish self-directed Solo 401(K)s, Self-Directed SIMPLE IRAs or Self-Directed SEP IRAs for their own businesses. Again, contact us for more information on which of these small business retirement plan account types my best fit your personal situation.

Investors should remember that many of these investments have low liquidity. They may not be appropriate for those who may have a short-term need to access the cash. Many of the best long-term opportunities may require you to tie up the cash for a number of years.

Prohibited investments.

The law allows tremendous flexibility in selecting investments for Self-Directed IRAs and other retirement accounts. However, there are a few investments that are actually prohibited by law:

  • Life insurance
  • Jewelry and gems
  • Collectibles such as art, oriental rugs and antiques
  • Alcoholic beverages
  • Coins and bullion of insufficient or inconsistent purity.

The bull market is not going to go on forever. If past is prelude, as the great mutual fund innovator John C. Bogle is fond of saying, we are long due for a serious market correction. When it arrives, you want to be as diversified into many different asset classes as possible, to minimize your risk exposure.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at