Core Principles: The Tools at Hand

1 Jan 2020

Core Principles: The Tools at Hand
Use What You Know. Refine Where You Excel.

When self-directed investors explain why they opted to leave their traditional or "captive" self-directed retirement accounts behind them, they usually refer to investments they wanted to make using their captive retirement capital. In the majority of these cases, those investments have something to do with an area of expertise for the self-directed investor and are often real estate-related.

This leads many would-be self-directed investors to make a serious strategic error: They write off the concept of controlling their own retirement capital if they are not real estate investors.

"I don't know enough about cash-flowing, turnkey real estate," one investor told SDI Magazine recently. "Once I do, then I'll convert my account." For most, this delay is unnecessary and unproductive.

Remember: Self-directed investors can use their retirement capital to invest in very nearly anything. Real estate is not your only option.

Real estate is certainly a preferred asset class because most of us have some basic experience with the concept of property ownership. Either we own our own home, have owned a home in the past, or have rented a residence from another property owner. Regardless of the side of the equation on which you reside, the concept of real estate as an asset is relatively easy to grasp. Investments in physical property are, as SDI Society founder Bryan Ellis likes to say, "simple, safe, and strong" and, therefore, solid investments upon which to build a retirement portfolio.

However, real estate is not your only option, and it is not the only good option either. Self-directed investors have the unique advantage of being able to leverage their personal areas of expertise to identify the best investment opportunities available and act quickly in order to acquire the asset or strike while the market is hot. That market might be precious metals (with some caveats), private equity, intellectual property, private lending, or, of course, real estate. The key to success is identifying your strengths and then leveraging those strengths in order to make the best investing decisions you possibly can.

Of course, it is not necessary to become an expert in every type of asset class prior to investing. You can also use your ability to do extremely effective due diligence on projects, markets, and people to optimize your self-directed investments.

In this quarter's "Core Principles" section, we will dedicate our time to breaking down important facets of self-directed accounts, explaining some of your logistical options when it comes to setting up your account, and addressing the process of evaluating an asset of any type for risk. With ground-level tools like these in your arsenal, you will be able to look at potential self-directed investments with a savvy, self-directed eye whether you just converted your account or have been happily self-directing for years. It's all simply a matter of using the tools at hand to make the best investments possible for your retirement portfolio and your legacy.

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