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What Makes A Self Directed IRA Better than A Regular IRA? Let’s Talk About That!

self directed ira vs regular ira

Why should you choose a self directed IRA over a regular IRA?

The typical retirement retirement accounts (IRAs and 401ks) are actively managed. The biggest custodians (firms) out there like Fidelity and Charles Schwabe to name a few. Many of you love the idea of a managed account but there are some drawbacks that make a self directed IRA a great option and something to highly consider.

The following are a few reasons why you should consider a self directed IRA over a regular managed retirement account.

It Is Hard To Beat The Market
The more you research online you will notice that it is very hard to beat the market. It is super hard for even the best of the best investment managers. Because of that it may not make a whole lot of sense to pay one when you could just invest in an index fund that matches up with the S&P 500 index.

Depending On Your Investor You May Not Be Unique
Sadly, there are so many times when investment managers don't tread you uniquely like they should. You may come to find out that you are invested in the same securities and funds as someone who has completely different needs. The idea when investing, especially with someone managing it for you is that it should be tailored to you. You should be changing the types of investments you are invested in as your needs change and your risk tolerance changes. If you have never had this conversation with the your investment manager you probably are invested in a pretty "generic" portfolio.

You can completely customize a self directed IRA even more than a regular IRA. Even if an investment manager is customizing your portfolio it can be even more customized and even more diversified with a self directed IRA.

Full Diversification Isn't Truly Possible
If you haven't read our article about beating risk with diversification  check it out for more in-depth chatter on this topic. The idea here is that an IRA at most custodians is only able to invest in things like stocks and bonds. Because of that you aren't truly using the full potential of your IRA. You could be investing in things like, real estate, gold and even private placements. The possibilities of the investments are endless with a self directed IRA. With a regular IRA you are quite limited with your investments.

Paying An Investment Manager Gets Pricey
It should be fairly obvious that paying an investment manager can get quite pricey. Typically they charge a flat fee or a percentage of your portfolio, while occasionally they charge an hourly rate. The issue with these charges is that they affect how much you are really making through your investments.

Because of these fees and charges that investment managers charge it is very smart to make sure you know what you are actually paying as far as fees and charges go. Also, depending on what your manager is investing in there are mutual fund fees and other fees that you may be paying that aren't exactly fees or charges from your manager. Try and get in the know and find out about all these fees as most of these fees can be eliminated if you are invested through a self directed IRA.

Remember, through a self directed IRA you are the manager and you get to decide what you are invested in, whether it be gold or a real estate investment.

These are just a few reasons why a self directed IRA is a great option over a regular IRA that is being managed by an investment manager. If you are interested in a self directed IRA and what else it entails contact us at any time as we are happy to help you make the move to a truly diversified IRA that enables you to invest in what you want to invest in.