By J.P. Dahdah, Founder & CEO
Money is Personal.™
And there isn’t a more personalized retirement investing vehicle than a Self-Directed IRA.
Every individual investor has their own unique financial pedigree and approach as to how, why, and what they choose to place their hard-earned retirement savings into.
Unfortunately, most financial institutions have led us to believe that it is all about them. Their research. Their investment philosophy. Their advice. And, most importantly, their products.
The message goes something like this: “We are experienced investment gurus. You aren’t. We know the market. You don’t. If you follow our advice and invest in our well diversified asset allocation strategies, you will be financially successful.”
Self-Directed IRA investors disagree.
We prefer putting our financial future in our own hands, instead of giving control and responsibility to third parties.
This doesn’t mean all Self-Directed IRA investors are the same. In fact, having the desire to control their IRA savings is the one and only trait Self-Directed IRA investors share. We all have different risk tolerances, time horizons, investment experience, account balances, financial literacy, retirement goals, investment appetite, etc.
One thing is for sure, though. Self-Directed IRA investors believe that diversifying our IRA savings outside the stock market will produce a better financial outcome than keeping all our retirement money on Wall Street.
Two Kinds of Self-Directed IRA Investors.
Once a Self-Directed IRA investor learns their IRA money can be used to purchase alternative assets legally in the private market, without tax penalties, they typically fall into one of two categories: “Hybrid” or “Pure.”
The Hybrid Self-Directed IRA Investor
You fall into this category if you like playing in both the public and private markets.
You utilize your Self-Directed IRA to increase diversification within your retirement savings. You choose to keep a portion of your IRA money in the stock market with a traditional brokerage IRA company (i.e., Fidelity, e*Trade, Schwab, Vanguard, etc.) and the other portion with a Self-Directed IRA company like Vantage.
The Hybrid Self-Directed IRA investor tends to make more deal-specific decisions because they are usually chasing performance more than anything else. They don’t care what market their investment returns come from, public or private.
You will commonly hear a Hybrid Self-Directed IRA investor say things like, “I just want to make as much money as possible.” They are willing to roll the dice with whatever opportunity sounds the most promising in any given market.
They are known to transfer money back and forth between their traditional brokerage IRA and Self-Directed IRA with the hope of optimizing various market conditions.
The Pure Self-Directed IRA Investor
You fall into this category if you don’t like the stock market and were incredibly excited when you learned that with a Self-Directed IRA, you could direct all your retirement savings into alternative asset strategies you understand and feel most comfortable with.
Being a Pure Self-Directed IRA investor doesn’t mean you don’t believe in diversity. You absolutely do. You just choose to allocate your IRA money into a diversified array of alternative investment options. You may choose to direct a portion of your IRA into secured promissory notes for fixed income and another portion into a rental property for your growth and income allocation.
As Pure Self-Directed IRA investor, you believe the stock market is too risky, too volatile, too confusing, and not going to help you reach your retirement goals.
What kind of investor are you?
Now that you have a clearer understanding of the two kinds of Self-Directed IRA investors, which one do you identify with most? The good news is that there isn’t a right or wrong answer. The goal is to maximize the unique benefits that a Self-Directed IRA offers and make it work for YOU the way you want.
If you are interested in learning more about Self-Directed IRAs, give us a call at 866-459-4580. One of our IRA Specialists will be happy to answer any questions you may have about Self-Directed IRAs.
Happy Investing!
