Entrust Learning Center > 8. Newsletter Archive > New Perspectives on Your Investments: Self-Directed Style

New Perspectives on Your Investments: Self-Directed Style

Unlike the weather outside, many of the attendees and some of the conference speakers forecast continued unsettled conditions into 2011, with a slogging stock market, higher unemployment, and continued choppiness in the bond markets.

By: Glen Mather

IRA Insights Newsletter

Greetings from the 2009 conference of the National Association of Personal Financial Advisors here in sunny Orlando, Florida.

Unlike the weather outside, many of the attendees and some of the conference speakers forecast continued unsettled conditions into 2011, with a slogging stock market, higher unemployment, and continued choppiness in the bond markets. Indeed, the theme of the gathering is “New Perspectives,” based on the realization that many of the group’s long-held ideas and market viewpoints might no longer be valid.

It is interesting that the advisors that clients rely on are as equally befuddled as the consumers. No help is forthcoming from the Federal Reserve as it vacillates between holding down interest rates and vowing eternal diligence against the specter of runaway inflation.

What possible choices does an ordinary individual desiring a reasonable retirement have? Actually, with a self-directed IRA, the investor has the best of all worlds.

Concerned about protecting capital? It is only through a self-directed IRA that you are able to access the best money market and CD rates because you are not tied to any institution. With a simple buy direction letter, a self-directed client can move an IRA to a bank that offers a 3% introductory rate for new clients, and when that expires, quickly move to another institution with attractive yields—all FDIC insured. Without the flexibility of having an administrator that can deal with the full menu of investments (everything that the IRS does not prohibit), many of the choices are not available.

Want to take advantage of depressed markets? In Orlando, investment real estate is now rebounding, thanks to a halving of median prices. Despite a soft rental market, IRA holders are moving back into the “dirt” asset arena, with cash flow returns that have not been seen in recent years. Unlike stock, which is often touted as “on-sale” when the price is depressed, real estate deals can be found that are significant, under even the lower appraised values.

Tax liens can be a tremendous way to expose your IRA portfolio to the real estate market, without the issues of landlord responsibilities. According to tax lien experts, when real estate prices are reduced, yields from tax liens normally rise. During a recent auction in central Florida, millions of dollars of tax liens went unclaimed, even at a 18% yield. During a subsequent re-bid, these investments were largely gobbled up by institutional investors when they became aware of the opportunity.

Need strong cash flow? Private lending is the choice of many who recognize the advantages of a banking environment that is unable to service even the most qualified applicants. Strong collateral, due diligence on the borrower, and in the case of investment real estate, solid cash flow all should be part of the underwriting process.
 
With a self-directed IRA, the client completely controls the process. Entrust clients are earning up to 18% on their loans, many with points at loan origination as well as early pay-off penalties.

Concerned about inflation? I recently attended the AARP annual convention. No, I’m not a member (although I qualify). I met a precious metal dealer who is seeing his business skyrocket, primarily through baby-boomers wanting to invest their IRAs in precious metals. These investors see this as an important hedge against inflation. Based on the long lines at his exhibit, the interest was intense because many people believe that the increasing government deficits and world conflicts make gold and other metals a great asset to hold for retirement.

No matter what your viewpoint, whether you seek the reward through risk or the ultimate safety, a self-directed IRA may very well provide the best path to a more wealthy retirement. As you save and invest for your retirement, you need the most skilled players on your team: tax professionals, CPAs, as well as investment advisors. Educate yourself on your options, choose good investments, and constantly monitor the results—your retirement is ultimately up to you.

Glen Mather is President of Entrust Administration Services, Inc., a member of The Entrust Group, the nation’s largest network of self-directed IRA administrators and record keepers.  He can be reached at (407) 367-3472 or gmather@entrustfl.com.