When we talk about Self-Directed IRAs and how it’s possible for investors to use them for all sorts of alternative asset classes, many people think about traditional stocks. If there is so much freedom possible with a Self-Directed IRA, why can’t an investor simply use a retirement account to invest in whatever stocks they please? The truth is: that’s exactly what you can do. Self-Directed IRA investors often want maximum flexibility and diversification in their accounts. And because of that, it can be a great option for stock investors who may not want to put money aside in other assets like real estate (or perhaps they do), but they simply want to focus on the stocks they choose.
If that’s the case for you, you may want to consider the benefits of opening a Self-Directed IRA for a Brokerage Account. Let us break these benefits down, point by point.
Paying Fewer Fees with a Self-Directed IRA for Brokerage Accounts
If you have a retirement Brokerage Account, you can easily move funds within that Brokerage Account without incurring wire and check fees. This means that the entire process will be very simple. It allows you to exercise plenty of freedom within the account, which gives you more flexibility as you manage your own investments. As the Self-Directed IRA administration firm, the custodian on the account would simply help manage administrative duties.
Maximizing Diversification—If That’s What You Choose
One reason investors often flock to Self-Directed IRAs? They understand that reducing risk in retirement investing is often an issue of diversification. By opening a Self-Directed IRA, they can hold non-traditional assets and traditional stocks in the same account. That means you might have an IRA that includes real estate investments as well as traditional public stocks, and even mutual funds. One of the big fears that potential Self-Directed IRA investors have is that they worry that a Self-Directed IRA is off the beaten path. But you can choose to manage your own risk and your own portfolio composition—and you can do it easily.
Limitations that May Be Good for You
Keep in mind that a Brokerage Account within a Self-Directed IRA cannot be at risk of going below a $0 balance. Why does this matter? For some investors—particularly those who trade in stock options—they can take on a lot of risk, which includes the risk of owing money if a particular stock does poorly. That’s not the case with simple buy and sell trades, of course. But for investors who trade stock options, the ability to use leverage also means the possibility of losing more than you put in. And if you want to avoid this kind of investing within your own retirement, it’s a good idea to use a Self-Directed IRA, because it will limit your ability to do so. You will not even have to worry about the possibility, because the Brokerage Account won’t accept such trades.
Making a Self-Directed IRA for Brokerage Accounts Work
What if you want to invest in traditional stocks, but you do not want to do so like a traditional investor? You will find that there are plenty of options for accomplishing just that. With a Self-Directed IRA and a Brokerage Account, you can take charge of your financial destiny. You can build a powerful, diversified portfolio of assets—or you can focus on one asset class. It’s up to you. But what’s important is that you do your research and learn the next steps.