Given the uncertainty in the stock market in recent months, there are a number of investors out there thinking about hedging. Hedging against inflation—which has been rampant—and hedging against the mainstream investments that most people tend to default to. And while we don’t make any specific recommendations about what investors should choose for their Self-Directed IRA, one thing we can do at American IRA is educate. With that in mind, what can you use in a Self-Directed IRA to add diversification to your portfolio? Let’s look at some of the top asset classes.
Using a Real Estate IRA
A “real estate IRA” is a nickname for a Self-Directed IRA that an investor uses to invest in real estate. Yes, this is one of the most powerful hedges against inflation, because there is only a finite amount of real estate available in the country. But what does real estate mean? It might refer to a single-family home you use as a rental property. Or it may refer to a large apartment building. It might refer to farm real estate, or even Real Estate Investment Trusts (REITs) you hold with a brokerage account. There are all sorts of options you can choose from for investing in real estate with a Self-Directed IRA; it ultimately comes down to your decisions as the Self-Directed IRA holder.
Cryptocurrency within a Self-Directed IRA?
Many people don’t realize that cryptocurrency is a legitimate investment. In fact, the IRS taxes cryptocurrency gains very similarly to other properties such as shares of stock. You can own cryptocurrency within a Self-Directed IRA as long as you go about it the right way. Remember: the IRS specifically prohibits some assets within a Self-Directed IRA, but they tend to be those assets with vague values, such as collectibles like wine or art. With cryptocurrency, you can look at the markets and know exactly where the value of that asset stands.
Investing in a Gold IRA
Similar to the “Real Estate IRA,” a “Gold IRA” is simply a Self-Directed IRA that you use to invest in gold. Gold has a long history as an investment; perhaps longer than anything else on this list. Gold goes back thousands of years as a store of value, and it remains a store of value even in modern times. One only has to look at the price of an ounce of gold to see how far gold has come over the years. It wasn’t long ago that an ounce of gold only cost thirty to forty dollars an ounce. But in the 1970s, the U.S. suspended the convertibility of dollars into gold, which essentially launched a new “hedge” asset. Today, many investors like to turn to gold because they believe it is a stable way to keep purchasing power within a Self-Directed IRA.
Keep in mind that not all forms of gold are valid retirement assets, such as gold jewelry, which is not allowed. You will have to purchase gold of sufficient purity and keep it in an insured approved depository for storage.
Other Types of Assets You Can Hold in a Self-Directed IRA
While these alternative asset classes are interesting for many, they’re not the end of the list. Investors can use commercial paper, stock, equipment and leases, hedge funds, and even royalty rights within a Self-Directed IRA. This is one of the reasons why investors find them so intriguing.