Private Company Investing

Private Company Investing Within a Self-Directed IRA

When most investors approach an IRA, it often comes with an emphasis on public companies. Public companies that comprise the stock market can make for an aggressive, well-diversified portfolio—in fact, it’s easy to argue that public companies are the go-to investments for most investors. But with a Self-Directed IRA, investors can try a number of other investment asset classes that don’t have to correlate with this market. And one of those asset classes is the possibility of investing in private stock in a company that isn’t listed on a major exchange.

What does Private Company Investing within a Self-Directed IRA look like? Here’s what you’ll need to know.

The Basics of Private Company Investing in a Self-Directed IRA

If you look at our section on private companies, you’ll find the following definition: “Private Company Investing is when you purchase stocks in a private, not publicly held, company. Iconic companies such as Google and Microsoft started out as private companies.”

This points out just how powerful it can be to get in the “ground floor” of a private company. Choose the right company and the value of a private stock can skyrocket from there—but that isn’t to say there are no risks. Like any other investment, there’s always the possibility that it doesn’t perform well. And it’s important to remember that investing in a private company does mean that one is putting money into an individual stock.

Knowing How Private Company Investing Works within a Self-Directed IRA

If you were to invest in a private company with a Self-Directed IRA, how does the process actually work? What does it look like? Imagine you have a Self-Directed IRA with American IRA, for example. If you knew the private company you wanted to invest in, you would fill out a buy direction letter to direct our staff to purchase the shares in this company on behalf of your IRA. You would then have documents related to the purchase, which you would have to sign as “read and approved.” This puts the shares directly into your IRA, which means that you will enjoy the tax benefits of whichever type of retirement account you’re using. For example, if you’re using a Roth IRA, you can let those shares grow tax-free within the account.

The beauty of investing in a private company is that if the company performs well, it can really catapult a retirement account. For example, investor Peter Thiel made waves when it was speculated that investments of stock within PayPal in a Roth IRA could potentially mean that Thiel had billions of dollars stored away in retirement accounts. This isn’t to say that it’s what every investor should anticipate when investing, but it shows the kind of potential that comes with investing in private stock.

What are the Advantages of Private Company Investing?

Private Company Investing can perform well when a company performs well, even if the general stock market isn’t performing well. This helps investors access a diversified portfolio of potential wealth without having to rely on what’s going on in the headlines every month. For that reason, Private Company Investing can be a powerful way for investors to seek out new ways of building wealth within a retirement account. However, it does require making the right investments in the course of retirement investing.

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 www.AmericanIRA.com.