Of course the first question must be, “What is a Self Directed IRA?” The difference between a regular IRA and a Self Directed IRA is that you have control over how your money is invested. Many brokers claim they let you decide where your money is invested, but to truly be a Self Directed IRA, you must be able to invest your money where you want to.

“Is this legal?” is often the next question. ERISA in the Securities Act passed by Congress in 1975 brought about banks and brokerage houses marketing IRA and 401K plans. They pushed the products they wanted to sell – stocks, bonds and mutual funds.

There was nothing in the IRS code that limited you to only investing with banks or brokerage houses, or only investing in stocks, bonds and mutual funds. Since that is what their bankers and brokers told them, people came to believe that was true.

Following the stock market crash and the corporate scandals and corruption, frustrated investors have begun to look for alternative investments. They want to be in control of their own investments. Many want tangible investments such as real estate.

When investors ask about these options, they are often told it can’t be done. This isn’t true, it’s just that their brokers won’t allow it. You can’t make these other investments through your broker, so they suffer financially when you make that move, and won’t encourage you to do so.

So, “What can my IRA invest in?” A better question is, “What can’t my IRA invest in?” Very strict regulations must be followed for an IRA. However, the IRS doesn’t give you a list of what you can invest in, instead they tell you what you cannot invest in: live insurance contracts and collectibles.

Here are some examples of things you can invest in: residential or commercial real estate, raw land, trust deeds, mortgages, private notes and loans. You could also invest in private stocks, LImited LIability companies (LLC), Limited Partnerships (LPs), and tax certificates. You can still invest in stocks, bonds and mutual funds; along with annuities, currency, futures, options, receivables, and commercial paper.

“What is ERISA?” ERISA stands for the Employee Retirement Income Security Act. This act passed the responsibility for an employee’s retirement plan from the employer to the employee. The only two investments prohibited are life insurance contracts and collectibles.

As a leading provider of self directed IRA and self directed 401k products, administrative and custodial services, NAFEP focuses on helping you succeed.