While most of the world was captivated by the World Cup in July 2018, IRA Financial was busy putting together a list of the most popular Self-Directed IRA investments for the summer of 2018.
A Self-Directed IRA offers a retirement account holder the ability to use his or her retirement funds to make almost any type of investment.. The IRS only describes the type of investments that are prohibited, which are very few. The main advantages of using a self-directed IRA to make investments is that one can generate tax-deferred or tax-free gains on investments one knows and understands.
The following are some examples of types of investments that can be made with your Self-Directed IRA LLC:
- Residential or commercial real estate
- Domestic or Foreign real estate
- Raw land
- Foreclosure property
- Mortgage pools
- Hard money lending
- Private loans
- Tax liens
- Private businesses
- Limited Liability Companies
- Limited Liability Partnerships
- Private placements
- Precious metals and certain coins
- Stocks, bonds, mutual funds
- Foreign currencies
- Hedge funds
- Private equity funds
However, after spending time crunching the numbers, the following have been the four most popular Self-Directed IRA investments for the Summer of 2018.
In general, most Americans have an enormous amount of financial exposure to the financial markets. Whether it is through retirement investments, such as IRAs or 401(k) plans, or personal savings, many of us have most of our savings connected in some way to the stock market. In fact, over 90% of retirement assets are invested in the financial markets.
Real estate continues to be the most popular alternative asset investments for retirement accounts. This trend has been pretty steady over the last ten years or so. The Internal Revenue Code permits you to engage in almost any type of real estate investment, aside generally from any investment involving a disqualified person.
Income or gains generated by an IRA generate tax-deferred/tax-free profits. Using a Self-Directed IRA to purchase real estate allows the IRA to earn tax-free income/gains and pay taxes at a future date (in the case of a Roth IRA the income/gains are always tax-free), rather than in the year the investment produces income.
The following real estate investments have been popular with our Self-Directed IRA clients in the Summer of 2018:
- Residential homes – for sale and flip
- Vacation homes for rental
- Mortgage notes
Bitcoin and other cryptocurrencies have had a nice rebound this summer. Coming off a huge run up in popularity towards the end of 2017 into the beginning of 2018, cryptocurrency had a very rough and cold winter in terms of popularity from retirement account holders. However, the summer has been warm and inviting for a growing number of Self-Directed IRA investors. Bitcoin has seen a nice rebound in price this summer and many investors have been getting more interested in Bitcoin and other cryptocurrencies as a Self-Directed retirement investment. According to a Wells Fargo Gallup Investor and Retirement Optimism Index poll, just two percent of Americans surveyed own Bitcoin. The poll is based on US adults who have at least $10,000 or more invested in things like mutual funds, stocks, and bonds. The Gallup survey also reveals that 26 percent of the US residents surveyed are “intrigued” by Bitcoin but have no plans in investing any time soon.
The most popular cryptocurrencies for Self-Directed IRA investors in the summer of 2018 have been:
- Bitcoin Cash
The term ICO or initial coin offering has gotten a lot of attention over the last several years. An ICO is what’s known as an initial coin offering. An ICO is generally used by start-ups to get around the complex regulations involved in raising money through venture capitalists or public markets. In an ICO drive, a percentage of the cryptocurrency is sold to early backers of the project or business in exchange for fiat or other cryptocurrencies—usually for Bitcoin or Ethereum. As of now, most ICOs are not regulated by any governmental agency.
ICO Rating agency summed up the results of the first quarter of 2018: the volume of attracted funds around the world through the ICO amounted to $3.3 billion for comparison, over the past year, ICO-projects collected $6.1 billion.
ICO is one of the most effective ways to attract venture capital. According to ICORating, more than 46.6% of the projects did not have a ready-made project at the time of token sales start, and the minimum viable product was only 26.2% of the projects. Only 15.5% of ICO companies had alpha-version of the product and 11.2% beta — version.
Before you put your money in a specific token, numerous factors should be taken into account to determine the best ICO, such as:
- amount of investments
- risk score
- technological inovativeness
- developers behind the project.
The most popular ICOs in terms of amounts raised have been:
- Huobi Token
Crowdfunding is an evolving method of raising capital that has been used to raise funds through the Internet for a variety of projects. Title III of the JOBS Act created a federal exemption under the securities laws so that this type of funding method can be used to offer and sell securities.
Before the new rules, private companies could seek money only from “accredited investors.” That’s defined as individuals who own more than $1 million in assets, excluding their primary residence, or have maintained an income of more than $200,000 for at least two years.
Under the new rules, those with more modest wealth will be able to invest in startups, with limits. People with annual income or net worth less than $100,000 will be allowed to invest a maximum of 5 percent of their yearly income or net worth, or $2,000 if that is greater. Those with higher incomes can invest up to 10 percent. An individual can’t invest a total of more than $100,000 in all crowdfunding offerings during a 12-month period. Investors generally couldn’t resell their crowdfunding securities for one year. The SEC also specified that crowdfunding must go through an intermediary, either a broker-dealer or a registered funding portal. Offerings need to be checked by outside accountants, and, in some cases, fully audited.
Crowdfunding provides another strategy for startups or early stage companies ready to take it to the next level — such as rolling out a product or service. Before, a business owner was subject to the caprices of individual angel investors or bank loan officers. Now it is possible to pitch a business plan to the masses.
Many Self-Directed IRA investors have used crowdfunding websites as a vehicle for investing in startups. The most popular type of equity related crowdfunding sites are AngelList, EquityNet, and Crowdfunder.
Using one of IRA Financial Group’s Self Directed retirement plans to make alternative asset investments offers a number of very interesting investment opportunities, including the ability to diversify ones retirement portfolio as well as the ability to invest in what you know ad understand.