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Investing in Alternative Assets a Shield Against Volatility

investing in alternative assets
3 Minute Read

Key Points


  • Retirement investors are choosing to make alternative asset investments in response to stock market volatility.  
  • To have a true Self-Directed IRA to make alternative investments, establish your account with a passive custodian.
  • Self-directing your investments comes with many benefits, the primary being investment diversity.

There is a recent trend where retirement investors are diversifying their retirement holdings into alternative assets and away from stocks. This is in lieu of a few concerns, including the fear of a U.S. recession, the Trump impeachment, and U.S.-China trade talks. By using self-directed retirement accounts, like the Self-Directed IRA, investors are using their retirement funds as a means of shielding themselves against stock market volatility. And according to a recent Forbes article, investors have indicated they will “continue this trend in response to market volatility.”

The good news is, investing in assets such as real estate, tax liens, precious metals, private business and even cryptocurrency are perfectly legal and have been permitted by the IRS since the inception of the IRA. It’s never too late to hop on the bandwagon – in this case, investing in alternative assets.

Investing in Alternative Assets

Most Traditional IRAs hold traditional investments, such as stocks, bonds and mutual funds. This is because IRAs are primarily opened at a bank or financial institution, entities that limit the investor to the financial products it sells – so, if they don’t sell real estate, you’ll be hard pressed to find real estate investments made with a Traditional IRA. But you can own alternative asset investments within an IRA if you work with a Self-Directed custodian (also known as passive custodian) that will allow you to make such investments, such as IRA Financial Trust Company. The only assets you cannot invest in are life insurance and collectibles, as stated in Internal Revenue Code section 4975.

As a result of market volatility, more investors are using self-directed retirement plans, like the Self-Directed IRA, for the sole purpose of investing in alternative assets. Although investors can use personal funds to invest, they will not receive the benefits of compounded returns, and tax-deferred/tax-free growth.

The good thing about self-directing is that you can still invest your money in traditional investments, if you so choose.

Benefits of Owning Nontraditional Investments

Nontraditional, also known as alternative investments, are for every investor and far less complex than some may think, especially if you work with a financial advisor. By investing in alternative assets with a Self-Directed IRA you can take advantage of its many benefits, the most important one being investment diversification.

Diversification. By investing in multiple categories, such as industries or businesses, you mitigate risk because the investments don’t move in the same direction. As a result, if your stock investments tank, your real estate investment may be performing well, thus making up for the loss.

Investments You Understand. Many investors like the fact that by investing in alternative assets, they get to invest in something they know and understand. Maybe you don’t understand Wall Street, but you’re an expert when it comes to cryptocurrency. The Self-Directed IRA allows you to invest in the asset classes you truly understand.

Control. If you’re tired of paying high custodial fees or waiting for the consent of a custodian to approve an investment, you can establish a Self-Directed IRA with “checkbook control.” With checkbook control, you will be the manager of your IRA and will have direct access to your IRA funds, allowing you to make investments quickly and efficiently. Keep in mind, the Self-Directed IRA with custodian control is a good structure if the investments you make don’t have a high frequency of investments.

Get in Touch

For more information on the Self-Directed IRA, download our free Self-Directed IRA information kit. Once you’re ready to get started, contact a specialist at IRA Financial directly at 800-472-0646 or fill out our contact form.

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