Is a Self-Directed IRA Good in a Stock Frenzy?

Is a Self-Directed IRA Good in a Stock Frenzy?

Within the last month, we saw some incredible things happen on Wall Street. Most notably, a group of Reddit users known as “Wall Street Bets” took on the hedge funds in attempting a short squeeze on GameStop stock. This temporarily took over the financial headlines and had investors all over the world asking all sorts of new questions. But we could not help but wonder: how does this fit within the context of a Self-Directed IRA?

What Self-Directed IRA Owners Should Think of Stock Frenzies?

The simple answer to this is: you think whatever you want to think. As a Self-Directed IRA administration firm, it is not our place to give specific financial advice when it comes to investments. But we can note what an IRA can and cannot do for people who might want to capitalize on the latest hot stocks.

What a Self-Directed IRA can do in terms of stock trading:

  • It is possible for an investor to have an IRA, and then use that Self-Directed IRA for the purposes of investing in the public stock market. Many investors will do this when they are not satisfied with the list of funds available to them by more traditional means.
  • Tax protections. An IRA, after all, is an account arrangement allowed by the government. This means that the government will willingly forgo the taxes that come out of, say, a Roth IRA upon retirement, as these taxes can grow tax-free and do not come with deductions on the front end. There are specific tax protections that all investors need to know about if they are considering using retirement accounts. Much of that information can be found here on our website, such as our Self-Directed IRA investing page.

What a Self-Directed IRA cannot do in terms of stock trading:

  • Trade in options. One of the reasons so many people were in a tizzy about the GameStop stock was that many people were trading in stock options. This is a way of utilizing leverage within a stock brokerage account to potentially amass significant gains. It also comes with significant risks. Typically, Self-Directed IRA investors use traditional methods of investing, such as investing in real estate and precious metals, rather than dealing in stock options.
  • Expect complete carte blanche. Although a Self-Directed IRA is a powerful way to invest—and a way that provides a lot of freedom and flexibility to investors—it is not a blank check to do whatever you want. It requires adhering to the specific rules of retirement, which in turn means that investors should know what the boundaries are. This helps them make wiser financial decisions that do not have adverse tax consequences down the line.

Is a Self-Directed IRA “Good” For Frenzies?

We cannot tell you what option for investing is the best for your individual investment style. That is something you would seek out a financial advisor for. But what we can tell you is that many investors use Self-Directed IRAs for the purposes of investing in real estate, precious metals, and a wide range of asset classes. This does not mean that you have to avoid investing in stocks. But if you want to invest in stocks, there are all sorts of account types available to you.

Retirement investors should be careful to think about their long-term plans. That is why we advise learning more about Self-Directed IRAs, what they can do, and why their unique quirks make them capable of investing in all sorts of asset classes.

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

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