When you invest in private placements through a self-directed IRA, it may be a win-win situation— The business owner gains access to needed capital and you gain the potential to reap a higher return on your investment. You also gain the benefit of diversifying your retirement portfolio.
Private placements—also called private stock or private equity—offer the opportunity to invest in privately held entities that are not sold in the open, public market. They often involve limited partnerships (LP), limited liability companies (LLC), and similar entities. These investments are offered to a small audience of investors.
These types of investments are not registered with the Securities and Exchange Commission.They typically are offered by privately held companies, partnerships, and small businesses—entities that often look to individuals, not banks, to raise the development capital needed to grow their businesses.
Download the Guide to learn more about the rules and how it works.
The process is simple once you have established and funded your self-directed IRA. Here's what you have to do to get started:
We always recommend that you open and fund your self-directed IRA right away so that your deal is not delayed. Transferring IRA funds from one custodian to another can sometimes take time. Download the free Transfer-Rollover Guide to plan ahead.
Private placements are offered without some of the protections—such as disclosure requirements—that apply to investments that are registered with the SEC. This makes it even more important that you pay attention to the details and to talk with a qualified legal or investment advisor.
Before lending money or investing in a business, do your due diligence. A successful investor is an informed investor. Here are few things to look out for:
It's always important to know who you are doing business with. A basic internet search can reveal if you are dealing with a bad actor.