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4 Benefits of Diversifying Your Portfolio with Self-Directed IRAs

ira-eggSelf-directed IRAs give investors an opportunity to not only diversify their portfolio but to also play a bigger role in their retirement investments. Tax-free profits, asset protection, deductions, and estate planning make self-directed IRAs a strong investment choice for investors qualified to manage the account. The benefits of using self-directed IRAs include:

  1. More reliable rates of return
  2. Tax benefits
  3. Increased options for real estate and business investors
  4. Investing in what you know

Reliable Rates of Return with Self-Directed IRAs

For most investors, stocks, bonds, and mutual funds will cover the bulk of their retirement account. While these are certainly the most popular assets, they’re not the only ones investors can choose from. If you’re worried about inflation and ensuring that your investments keep pace with the rapid economic changes, then taking advantage of a self-directed IRA offers a wide variety of benefits.

With a self-directed IRA you can invest in things outside of the ordinary stocks and funds that brokers and banks work with. Instead, you can invest in rental property, small businesses, and much more! Because you’re directing how the IRA works for you, you’re not limited to a trustee’s narrow option of stocks, bonds, and mutual funds. You’ll find that your options are suddenly more plentiful.

Taxes are Favorable for Self-Directed IRAs

One of the biggest concerns for any investor is how taxes will affect the money earned. With self-directed IRAs, you can leverage the benefit of tax-free profits to maximize the rate of return that the investment is experiencing. However, tax rules also limit the types of investments that you can pursue through a self-directed IRA. Also, if your investment loses money, then you cannot deduct anything.

Because you don’t get taxed on any profit and your investment is able to grow tax-free, self-directed IRAs are great opportunities to manage your portfolio for exponential growth.

Options for Real Estate and Business Investors

Instead of investing in your typical stocks, bonds, and mutual funds, you have the opportunity to invest in small businesses and real estate. Just like any other investment, the potential rate of return could be much higher for a private investment than the stock that public corporations offer. Similar to a venture capitalist, you can leverage a self-directed IRA to invest in promising small businesses. If the business takes off, the financial benefits for you could be huge. The situation provides the same benefits for real estate.

Invest in What You Know

With self-directed IRAs, it’s up to you to manage your account and leverage your own knowledge of investment opportunities. Whether it’s real estate or business, this gives you the opportunity to invest in what you know, which gives you more power as an investor. Working in the mortgage arena or business field that you’re already comfortable in allows you to navigate the waters easily, taking risks beyond ordinary securities that could one day yield extraordinary results.

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