By J.P. Dahdah, Founder & CEO of Vantage
Choosing where to invest your Self-Directed IRA is not as simple as buying and selling securities. Your money is at stake and bad investment decisions can result in significant losses. A good investment decision is ultimately grounded on a well-thought out and well-planned investment process.
While there is no standard procedure for decision-making it is often shaped by industry practice. A good investment decision process is personal to the investor and should be based on your own appetite for returns and risk preference. Whether your current decision-making process is for wealth maximization or risk minimization, here are three basic ways to improve your self-directed IRA’s potential for success:
1. Systematic investment selection. Building your investment portfolio begins with identifying assets in which you want to invest. It involves asset allocation, industry and sector allocation, and asset selection. Your preference for short-term or long-term returns and risk will have a huge impact on how you will allocate your funds among various assets. One important tip that you should apply to your portfolio construction is diversification; remember to never put all of your eggs into one basket.
2. Due diligence. Now that you’ve decided where and how much to invest, it’s time to put your prospective investments under strict scrutiny. By conducting your own research, you get to have a full picture of what you’re about to purchase and its potential returns. For example, if you’re planning to invest in a private loan,you have to analyze your potential borrower’s ability to repay their loan by understanding past and future cash flows.
3. Proper selection. In any transaction, you need to evaluate the optimal entry and exit points of your investment.
By adopting these approaches in your investment strategy, your Self-Directed IRA will grow by leaps and bounds.
For more information on how you can discover your IRA investing alternatives, contact our team at (866) 459-4590 or ClientService@VantageIRAs.com.