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Alternative Investments in an IRA

Did you know that you can make alternative investments with an IRA? With a Self-Directed IRA, you can make traditional and alternative investments. 

Alternative Investments in a Self-Directed IRA

Alternative assets typically refer to investments that are not considered traditional asset classes frequently targeted by most IRA investors, such as stocks, bonds, or cash investments.  The most popular type of traditional investments are publicly traded investments in stocks, bonds, or cash. The common method of investing in traditional assets is through public markets, where companies sell shares to the general public via stocks exchanges, such as the NYSE and NASDAQ.

Alternative assets are investments outside of traditional investments. Common examples of alternative investments include real estateprivate equitycryptocurrenciesprecious metals, such as goldstructured settlements, and venture capital investments. Whereas traditional investments include stocks, bonds, and bank CDs. 

Key Points

Understanding Alternative Investments in an IRA

Traditional assets, such as stock, mutual funds, and ETFs are by far the most popular investment option for IRA owners. With over 65 million IRAs worth approximately $13 trillion dollars, it is estimated that between 85%-90% of IRA assets are invested in traditional investments.  The primary reason for this is that the largest financial institutions, such as Fidelity and Vanguard only allow IRA investors to invest in traditional assets.  The reason – like almost everything comes down to money.  Financial institutions make money from selling traditional investments, such as stocks, they do not make money from allowing IRA owners to buy real estate.


The majority of Americans wealth is invested in traditional equities and fixed income markets.  There are approximately 65 million IRAs worth approximately $13 trillion dollars. It is estimated that close 94% of IRA assets are invested in traditional investments, like stock.

Since the creation of IRAs in 1974, alternative investments such as real estate have always been permitted to be invested by IRAs. But few people seemed to know about this option until the last several years.   So why can’t you invest your IRA in alternative assets at a bank or traditional brokerage firm?

Not surprisingly, the answer comes down to money. Traditional brokerage firms make money and fees on your cash and from selling traditional investments, like stocks, mutual funds, and ETFs.  They do not generate any revenues or profits when your IRA invests in alternative investments, such as real estate.  Hence, it is not in their financial interest to publicize the fact that the IRS allows all IRAs to invest in alternative assets, such as real estate, precious metals, cryptocurrencies, private placements and much more.

Benefits of Investing in Alternative Investments

  1. Diversification

In general, most Americans have an enormous amount of financial exposure to the equity markets. Whether it is through retirement investments, such as IRAs 401(k) plans, or personal savings, many of us have most of our savings connected to the stock market. Over 90% of retirement assets are invested in the financial markets. With over $33 trillion in retirement assets as of 2023, you can see the scope of that exposure. Investing in non-traditional assets offers a form of investment diversification from the equity markets.

Additionally, the more diverse your portfolio, the greater the chance that your assets will offer lower correlation. In other words, they are less likely to move in the same direction. However, diversification does not assure profit or protect against loss. Nevertheless, the use of non-traditional asset classes can help protect your portfolio when the market is down. It can also help protect you from losing more than the market.

  1. Invest in Something You Understand

Many Americans became frustrated with the buoyancy of the equity markets. Many Americans have yet to recover from the market swings and they aren’t 100% sure what goes on in Wall Street or how it all works. Real estate, for comparison, is often a more comfortable investment for the lower and middle classes. You may relate. You most likely grew up with an understanding of such investments. Whereas the upper classes learn about Wall Street and other securities during their younger years and college days.

We all hear talk about the importance of owning a home or the amount of money that you can make by owning real estate. Reality TV-related real estate programming is growing in popularity, and this is contributing to real estate becoming a mainstream asset category. It’s also rising as one of the most trusted asset classes for Americans. Of course, it isn’t without risk, because there are no risk-free investments. However, many retirement investors feel more comfortable understanding the real estate market and buying and selling real estate than they do stocks.

  1. Inflation Protection

Rising food and energy prices and high federal debt levels have recently fueled new inflationary fears. As a result, some investors may look for ways to protect their portfolios from the ravages of inflation. It is a matter of guesswork to estimate whether these inflation risks are real. However, for some retirement investors, protecting retirement assets from inflation is a big concern. Inflation can hurt a retirement portfolio because it means a dollar today may not be worth a dollar tomorrow. It also increases the cost of necessities that are vital to living and enjoying life, such as bread, gas, shelter, clothing, medical services, etc. This decreases the value of money so that goods and services cost more.

For example, if someone has an IRA worth $150,000 at a time of high inflation, that $150,000 will be worth significantly less or have significantly less buying power. This can mean the difference between retiring and working the rest of your life. Buying hard assets is seen as one way of protecting your assets against inflation. Many investors recognize that investing real estate, for,  can provide a natural protection against inflation. As you may know, rent tends to increase when prices increase. This acts as a hedge against inflation.

  1. Hard Assets

Many alternative assets, such as real estate and precious metals are tangible hard assets. In other words, you can see and touch them. With real estate, for example, you can drive by with your family, point out the window, and say, “My IRA owns that”. For some, that’s important psychologically. This is especially the case in times of financial instability, inflation, or political or global upheaval.


Popular Alternative Investments

Non-traditional assets, like real estate, are perfectly legal investments. The IRS has allowed investors to use their retirement funds to invest in such assets since 1974. And the best way to do this is through the Self-Directed IRA. A Self-Directed IRA allows you to invest in a wide range of assets and diversify your portfolio. The most commonly held alternative investments in an IRA include: 

While some alternative investments are more common, with a Self-Directed IRA you can invest in just about anything.

Learn More: Self-Directed IRA vs. Traditional IRAs

Self-Directed IRA's & Fees

Self-Directed IRA custodian fees really do matter and could end up costing you tens of thousands of dollars for your retirement by making the wrong custodian choice for your self-directed IRA.  The tax advantages and gains you derive from investing your self-directed IRA into alternative assets will be negatively impacted by choosing the wrong self-directed IRA custodian. Some self-directed IRA custodians charge fees based on the value of your IRA. Thus, as your IRA goes up in value so do the fees you will pay to the IRA custodian.  On the other hand, some companies, like IRA Financial, charge a flat annal fee for a self-directed IRA irrespective of account size or the volume of transactions done by the IRA.  For example, for a self-directed IRA with a value of $200,000, choosing IRA Financial over another custodian that charges fees based on annual account value, can save you at least $7800 over ten years assuming your IRA does not go up in value.  When you include the fact IRA Financial does not charge any transaction or wire fees, the savings are even more significant.

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Getting started investing in alternative assets is easy! Simply follow our three simple steps and you start investing. Best of all, you can invest in what you know and love. No longer are you limited to traditional IRA investments, including stocks, bonds and mutual funds. With a Self-Directed IRA for alternative investments, you can invest in traditional and alternative investments. Diversify your retirement today! 

  • Open a Self-Directed IRA

  • Fund your IRA

    To the Solo 401(k) plan up to $69,000 ($76,500 if at least age 50) in 2024. Contributions can be made dollar-for dollar. Just make sure you have sufficient earned income (Schedule C or W-2). Passive income, such as rental income, capital gains, interest is not eligible for plan contributions.

  • Begin Investing in Alternative Assets

    And can be invested or distributed without tax.

Do you still have questions about an IRA custodian and the importance of using a Self-Directed IRA custodian for alternative asset investments? Contact IRA Financial Group at 800-472-0646.