Non-Traditional IRA Investments
The IRA or individual retirement account is a versatile type of retirement account as it allows you to invest in a variety of securities. Unlike with the 401k, your investment options are not limited to stocks, bonds and mutual funds in most cases. There are several non-traditional investments that you could put your money into that can provide diversification and possibly superior returns.
Other People Are Reading
-
Types
-
You have many options that you can put your money into when investing in an IRA.
For example, you could invest in a company that you started so as to fund a new business. You can also invest in real estate directly by purchasing property (as long as you don't reside there) or indirectly by investing in a real estate investment trust. Things like commodities, futures, options and currencies are also considered non-traditional investments. All of these investment types have some merit when building a portfolio.
Benefits
-
Investing in non-traditional investments can provide you with a number of benefits as an investor. When you put money into investments that you would not normally consider for an IRA, you can provide valuable diversification for your portfolio. For example, if you invest in real estate with your IRA funds, you could withstand a downturn in the stock market or the bond market. These non-traditional investments also sometimes provide superior returns compared with what you could generate from traditional investments.
-
Rules
-
According to the federal government, there are certain items that would qualify as prohibited transactions if you were to invest in them. The rules will not allow you to invest in collectibles such as art, antiques, gems, coins; life insurance policies; or transactions that benefit a plan fiduciary, service provider, employer whose employees are covered by the plan or other "disqualified persons" as defined by the Employee Retirement Income Security Act of 1974.
Risks
-
One of the problems that people run into when investing in non-traditional investments is that they put money into things that they do not fully understand. Most people have a good idea of how to invest in mutual funds and traditional investments. When it comes to putting money into things like the currencies market, many people do not understand the process. When getting involved with non-traditional investments, it is critical that you understand what you are doing.
Considerations
-
Pursuing non-traditional investments for your IRA portfolio can be a good way to invest in things that you are comfortable with. For example, if you are a real estate expert, you may want to put a good portion of your retirement funds into real estate investments instead of the stock market. Non-traditional investments are a way to get away from the standard investment types and bring in superior returns. Just remember that these types of investment usually carry a higher level of risk.
-
References
- Photo Credit Artifact images/Photodisc/Getty Images
