I heard recently that 98% of IRA funds (anywhere from 5 to 14 TRILLION) dollars are invested in the stock market with 2% of that market share being invested in non-traditional assets i.e. mortgage positions, tax liens, startup companies etc. With the global markets melting down, I am curious as to why more people aren’t investing their funds in self-directed IRAs. I think it goes beyond the mere fact that….well….people have no idea that they actually can invest in non-traditional asset classes if they work with a self-directed IRA company (See my earlier post Why Don’t More People Self-Direct IRAs into Real Estate?)
Although that is a HUGE component, I think its more the symptom and not necessarily the disease. Beyond that huge hurdle is “Ok…great…Mr. or Mrs. Self-Directed IRA person, I get that I can self direct my IRA but can you recommend an investment for me to invest IN once I roll my old 401K over to your organization?”
The answer is indubitably and definitively no!
Why, you ask? Because, self-directed IRA companies are forbidden from providing investment advice. This is an interesting and cruel twist of fate for the population en mass, the self-directed IRA companies that hope to serve them and the real estate investor (and other kinds of investors) who would like to work with said individuals rolling over 401ks. Big business essentially has a monopoly on 401K monies (when was the last time you worked at large corporate organization X and went to HR and said “I would love to invest my money in an individual mortgage position in a local market and have the borrower personally guarantee to pay me back or I’ll foreclose and seize the asset and file a deficiency judgment against the borrower.” I am guessing not often.)
So you see, even if you knew that you could self-direct you still might not know how to invest or what in. At the end of the day, you should invest in something that makes sense to you, allows you to sleep at night and provides you some protections.
Just the thoughts of one man who recently watched his stock market investment account half in value.
Via { EpiphanyMD }
