Unlike other traditional retirement investments, a self-directed IRA leaves you on your own. While navigating a self-directed IRA on your own is a viable investment option, there are many potential dangers when it comes to fraudulent investments. If you encounter a fraudulent investment, the most important thing to remember is that you’re on your own.
Self-directed IRAs don’t allow you to take advantage of an investment advisor who offers advice and knowledge. Instead, the expert is you, and it is up to you to not only grow the investment, but also ensure that it’s protected against fraud.
To successfully manage your self-directed IRA, remember that:
1. You need a custodian.
When investing in a self-directed IRA, you are able to pursue hedge investment opportunities such as gold coins. However, government regulations do not allow you to manage these types of accounts on your own. Should you choose to pursue these investment avenues, you must find a custodian.
Fortunately, finding a custodian isn’t as difficult as you might think. Your regular broker, licensed custodian, or online broker can all manage your accounts. Just ensure that the individual you hire is not only qualified and licensed, but is also knowledgeable about the legal considerations involved.
To find a custodian who will truly serve your best interests, it’s best to entrust your IRA to someone you already know or work with. In other words, if someone has proven themselves to be honest in the past, he or she is likely to remain honest now, especially when handling self-directed IRAs that focus on precious metals. If you’re searching for a custodian you don’t already know, be sure to avoid too-good-to-be-true-promises. Do your research, and be sure you understand the rules of a self-directed IRA yourself.
2. You must be wary of fraud.
There are many fraudulent entities preying on self-directed investors, so it’s crucial to know how to arm yourself and protect your investments. If you hire a custodian, this is one of the greatest opportunities for fraud to affect your self-directed IRA. An untrustworthy custodian could easily steal from unwitting investors, only to hit the road and never be seen again.
One of the biggest ways to avoid fraud is to be knowledge about the rules of self-directed IRAs yourself. By understanding how these investments work, you’re not only preparing yourself for success, but ensuring that you don’t fall victim to a scam artist as well. Furthermore, look for trustworthiness in potential custodians.
3. You should invest in what you know.
Self-directed IRAs are already riskier investments because you don’t have the guidance of a broker or other financial professional. Instead of taking a risk in a field where you have no expertise, invest in what you know. For instance, if you’ve already made money through real estate, hedge funds, or any other performance portfolios, then those are great places to start. Instead of having to learn a new financial strategy, invest in your own field of expertise.