If you ask a bunch of investment professionals whether you should be investing in self-directed IRAs you are going to get mixed results. This is because some think it’s a great idea and others think that it’s just too risk for the average person to do on their own. I happen to agree more with the latter set of investors, but that doesn’t mean that a self-directed IRA would be a risky decision for you.
Even though I believe that the average person would be hard-pressed to earn a good return on an investment they make in a self-directed IRA, that doesn’t mean that you’ll be. If you are an above-average investor or you are willing to work hard enough it is very possible to earn a great return off of investments that you choose yourself.
The first thing that you should do when trying to decide if this is the right path for you is to think about your skill set and how that helps to make you a better investor. If you have a very good understanding of any particular industry that’s a great place to start. For instance if you worked as a contractor all your life and know a great deal about houses you may be able to build your retirement account investing in real estate. If you worked at a bank denying or approving loans for new businesses you may have the knowledge required to invest in new companies who need capital to grow. The more applicable knowledge that you already have, the better your odds are of being successful with self-directed IRAs.
You also have to consider how hard you are willing to work to make your investments pay off and how much time you can commit. If you have all the time in the world to learn about a new type of investment, there is no reason that you can’t be successful with it. However, if you can only put in an hour or two a week learning new concepts and studying you will have a hard time achieving the level of expertise needed to make good investment decisions.
Hopefully now you have a better idea of whether or not investing in a self-directed IRA is a good move for you. For many people it is a bit risky, but if you have faith in your ability to choose a good investment then there is no reason to believe that you can’t earn a sizable return for your retirement account.
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Self Directed IRA Risky or Smart?
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