What is Self-Directed Investing?
The pandemic lockdowns further increased the rise in self-directed investing. This may have been caused by savvy investors looking to take advantage of self-directed investment vehicles to maximize returns. Unlike most industries that were affected, we continue to see growth in self-directed investing. But although there is more awareness, many investors are still confused on how it works.
Many big banks and platforms have made it easier for investors of all ages across varied socioeconomic backgrounds to throw their hat into the "self-directed" stock market trading ring. However, this is not truly self-directed investing like we know it.
Let’s take a look at what self-directed investing entails in our industry, how it differs from more traditional forms of investing, and some of the advantages provided to investors using this investment vehicle.
What is Self-Directed Investing?
Self-directed investing allows investors to research, buy, and sell through their own initiative. You’re in the driver’s seat when it comes to choosing what you would like to invest in with your IRA. Essentially, you devise a plan to strategically build and manage your own investment portfolio using a self-directed IRA custodian and your knowledge of assets.
How Does Self-Directed Investing Differ from Conventional Forms of Investing?
The biggest difference between self-directed investing and conventional investing is who is making the decisions. Conventional investing requires the use of an advisor and more traditional financial institutions to make investments on your behalf. A financial advisor chooses how to direct your investment funds. Self-directed investing puts you directly at the wheel— you’re in complete control on how you want to invest your IRA money.
Self-directed investing has gained much acclaim amongst the California Association of REALTORS®, one of the largest chapters in a trade organization in America, the National Association of REALTORS®. You see, real estate is the number one asset of choice in self-directed IRAs.
There’s a variety of factors driving the increase of self-directed investing. Awareness amongst large organizations is one of them.
What are the Advantages of Self-Directed Investing?
There are several advantages to consider when looking into self-directed investing, such as:
Paying lower investment fees.Thousands of alternative investment options are more accessible to investors thanks to zero-commissions. You should always compare custodians before opening an account.
Choosing exactly what you want to invest in.You are not pigeon-holed by a financial advisor or employee when it comes to choosing what to invest in. Build a portfolio that reflects your investment ideology and knowledge.
Buying and selling conveniently.With your direction, a custodian like IRAR can help you buy and sell when you wish. You are not required to hold the investment for a period of time. You can buy and sell when you want— it's your decision.
For newer investors who are unfamiliar with the self-directed process, these advantages can also become disadvantages without the right custodian or resources to make informed investing decisions. Because you do it all yourself as part of your responsibility in the investment process, you can spend more time conducting due diligence.
Luckily, our self-directed investing educational platform, provides educational tools and guides to help investors build a well diversified retirement portfolio while learning about strategies and IRS rules. You may not be able to reduce the presence of risk entirely, but using our educational resources can supplement your ability to make informed decisions.
How Do I Get Started with Self-Directed Investing?
To get started with self-directed investing, do some research and learn the basics of how to choose a self-directed IRA custodian. Develop your own investment strategy using insights from basic principles and your knowledge of particular assets allowed in an IRA. Open a self-directed IRA account— as soon as your account is approved with funding, you’re ready to start investing. Follow up by regularly monitoring and managing your investments.
How Can IRAR Help?
For nearly 30 years, our dedicated team of self-directed IRA experts have been helping clients diversify their investment portfolio. We offer investment education on the ins and outs of regulations governing self-directed accounts.
Book a free consultation with one of our experts today to embark on an exciting new journey of building income and wealth from self-directed investing. It’s your future of financial freedom— IRAR is here to help you plan for it.