What Are Alternative Investments to the Stock Market for IRAs?

You may already know that real estate is a popular asset in self-directed retirement plans. But alternative investments to the stock market include much more than real estate. This asset class offers many possibilities beyond Wall Street stocks, bonds, and mutual funds. This article provides a deeper look into what’s available with some examples that you may not know exist.

First, let’s talk about why people use alternative investments.

Diversification is critical to minimize risk and protect your retirement savings. YouPicture of the sun shining brightly through skyscrapers in the distance, a stock market graph, and stacks of coins that represent alternative investments. shouldn’t plow your money into just one or two assets in any investment portfolio. Instead, a healthy mix is suggested by financial advisors. You want to include options that can hedge losses on the stock market and offset low gains on mutual funds.

Alternative investments provide that avenue for diversity, and you can invest in them if you use a self-directed IRA or solo 401(k).

Why Use a Self-Directed Retirement Plan?

The best feature of self-directed IRAs and solo 401(k)s is that you, the account owner, choose the investments instead of relying on a third party for these decisions. When you use your own knowledge and expertise, you can get creative with alternative investments to the stock market you pick for your IRA. You also have the control to buy and sell assets as you see fit to reap potential growth opportunities in your plan.

What Are Alternative Investments besides Real Estate?

As we mentioned, real estate is a common asset in self-directed plans. You can invest in things like commercial property, rehabs, and tax liens to earn tax-sheltered retirement income. The rental market is particularly hot right now, rebounding from its stumble during the height of the COVID-19 pandemic. Experts project the rental sector to grow at a compound annual growth rate of 8 percent rate over the next few years—potentially reaching $2216.2 billion in 2023 compared to $1759.8 billion in 2019. With that in mind, multifamily and residential rental properties may be worthy assets for your IRA.

However, real estate is only a small piece of the alternative pie…

In fact, the alternative class is so vast, there is not one list that encompasses all the possibilities.

Per Internal Revenue Code Section 4975, the only alternative investments not permissible in an IRA are collectibles and life insurance. Other than that, well…let your imagination run wild.

Below is a short list of assets allowed in self-directed retirement plans. While Advanta IRA does not sell investments or give advice, we can tell you what’s available. You can decide which options best suit you.

Here Are More Than 30 Alternative Investments to the Stock Market:

  • Single family homes
  • Multifamily condos and apartments
  • Commercial property
  • Improved and unimproved land
  • Real estate investment trusts (REITs)
  • Rehab-and-flips; rental property
  • Real estate syndications
  • LLCs, LLPs, and trusts
  • Farmland and timberland
  • Livestock and crops
  • Foreign land
  • Tax liens and deeds
  • Private lending options (mortgages and other loans)
  • Oil and gas rights; mineral rights
  • Accounts receivable
  • Warrants and structured settlements
  • Private equity and private stock
  • Commercial paper
  • Convertible notes
  • Businesses; franchises; startups
  • Futures trading
  • Foreign exchange (forex)
  • Hedge funds
  • Bitcoin
  • Energy options (solar, wind, coal mining, etc.)
  • Sustainable (or socially responsible) investments
  • Crowdfunding
  • Precious metals (gold, silver, platinum, palladium)
  • Equipment leasing
  • Mobile home parks
  • …and many other investment options

The “…and much more” part is no joke.

You can own an alpaca farm or racehorses as a business in your IRA. Your self-directed plan can invest in a cool little bar in some tropical locale or even in your own town. Airbnbs are popular now—they, too, can be held in IRAs. Office space, strip malls, and raw land may be fruitful assets. If you have friends who could use a loan, your IRA can be the bank. Are you familiar with real estate? Maybe rehabs or rental property are for you. All income earned from any asset in your plan is deposited directly into the plan on a tax-sheltered basis. Even capital gains from the sale of real estate.

The point is you have the power to invest in what you personally know and understand. With so many alternative assets to the stock market, surely there is something you can find to help build the retirement income you desire. And if you hear about an asset you don’t know much about, you can always learn!

Want to Learn More?

Advanta IRA offers free events on alternative investments to the stock market and self-directed plans. Our staff lead these interactive events, hosting guest speakers who can help round out your knowledge and investing strategy.

If you’d like to speak with someone about how self-direction can help increase the wealth-building potential of your retirement portfolio, contact us today.

This article was first published on February 20, 2020 and has been updated to include current information.

Free eBook

Self-Directed IRAs:
Take Control of Your Retirement Funds

Download

About Scott Maurer

Scott is an attorney and a graduate of the University of Florida Law School. Scott started his career with Advanta IRA in 2006. His experience with various investment types and their unique processes makes him an invaluable asset. Scott holds the designation of Certified IRA Services Professional (CISP) and leads engaging seminars and webinars that educate the public on the intricacies of self-directed IRAs.