By J.P. Dahdah, Founder & CEO | Vantage IRAs
Every individual investor has their own unique financial pedigree and approach as to how, why, and what they choose to place their hard-earned retirement savings into. Money is Personal™ and there isn’t a more personalized retirement investing vehicle than a Self-Directed IRA.
Unfortunately, most financial institutions have led us to believe that it is all about them – their research, investment philosophy, advice, and most importantly, their products. Their message goes something like this: “We are experienced, investment gurus. You aren’t. We know the market. You don’t. If you follow our advice and invest in our well-diversified asset allocation strategies, you will be financially successful.” However, Self-Directed IRA investors choose to differ. We prefer to put our financial future in our own hands, instead of shifting control and responsibility to third parties.
This doesn’t mean that all Self-Directed IRA investors are created equal. In fact, having the desire to be in control of their IRA savings is probably the only trait Self-Directed IRA investors share. We all have different risk tolerances, time horizons, investment experience, account balances, financial literacy, retirement goals, investment appetite, etc. Each of us must hone in on our investor characteristics that drive and support our IRA investment choices. This is easily highlighted within the AZREIA community. Each member joins AZREIA because their investment appetite includes real estate, but that doesn’t mean that it is the only asset class you like or that every member wants the same type of real estate investing strategy. Some members like to fix and flip residential properties, some love wholesaling, others may like multifamily investing, while there as also members that diversify their money into a combination of various real estate strategies. One thing is for sure, Self-Directed IRA investors believe that diversifying our IRA savings outside the stock market will produce a better financial outcome than keeping all of our retirement money on Wall Street.
Ultimately, however, Self-Directed IRA account holders fall into one of two categories once they learn that their IRA money can be used to purchase alternative assets legally in the private market without tax penalties – “The Hybrid” Self-Directed IRA Investor or “The Pure” Self-Directed IRA Investor:
The Hybrid Self-Directed IRA Investor – You fall into this category if you like to play in the public and private markets. You utilize your Self-Directed IRA to increase diversification within your retirement savings. You choose to keep a portion of your IRA money in the stock market with a traditional IRA company (i.e. Fidelity, e*Trade, Schwab, Vanguard, etc.) and the other portion with a Self-Directed IRA company like Vantage. The Hybrid Self-Directed IRA investor tends to make more deal-specific decisions because they are usually chasing performance above all else. They don’t care what market their investment returns come from, public or private. You will commonly hear a Hybrid Self-Directed IRA investor say things like “I just want to make as much money as possible.” They are willing to roll the dice with whatever opportunity sounds the most promising in any given market. They are known to transfer money back and forth between their Brokerage IRA and Self-Directed IRA with the hope of optimizing various market conditions.
The Pure Self-Directed IRA Investor – You fall into this category if you don’t like the stock market and were incredibly excited when you heard about Self-Directed IRAs because you learned that you finally direct all of your retirement savings into alternative asset strategies you understand and feel most comfortable with. Being a Pure Self-Directed IRA investor doesn’t mean you don’t believe in diversity. You absolutely do. You just choose to allocate your IRA money to a diversified array of alternative investment options. You may choose to direct a portion of your IRA into secured promissory notes for fixed income and another portion into a rental property for your growth and income allocation. Ultimately, you are a pure alternative asset investor that believes the stock market is too risky, too volatile, too confusing, and not going to help you reach your retirement goals.
So, now that you have a clearer understanding of the 2 types of Self-Directed IRA investors, which one do you identify with most? The good news is that there isn’t a right or wrong answer. The goal is to maximize the unique benefits that a Self-Directed IRA offers and make it work for YOU the way you want.
Lastly, if you are an AZREIA member that has IRA savings locked up with a Wall Street-based IRA company and isn’t aware of what a Self-Directed IRA is, we encourage you to contact us at www.VantageIRAs.com so we can educate you on the easy steps to follow to begin to use your retirement money to fund your real estate deals tax-free!