Have you been considering self-directed investments in your IRA? Do you feel stuck? Are you in the pattern of thinking about it, doing all the research, and then doing nothing about it? If so, it’s probably because you have some preconceived notions, both conscious and subconscious that are holding you in place, and ultimately limiting your ability to use a self-directed IRA as a way to diversify your portfolio and gain greater control by investing in what you know and understand.
I’ve identified five preconceived notions that tend to have people stuck and unable to pull the trigger:
People who think they can’t control the outcome.
We’ve developed extremely limiting beliefs about controlling our investment outcomes. Over the past several decades, investment companies have systematically trained us that giving them control over investment decisions is the best way to achieve our financial goals. Sure, it is potentially a great service that they provide and I’m not saying it’s right or wrong, but the marketing message has had a lasting impact in our heads. Combine that with the images that we’ve been fed of people who try to control their own investment portfolios. Those images typically look like day traders, real estate mavericks, and others that take a high level of risk.
SUGGESTION: Consider that there is a middle ground that’s ok and not crazy and scary. This will take some getting over the images and marketing campaigns we’ve been fed.
People who convince themselves that there are no other investment alternatives.
Many times the roadblock to moving forward is that we aren’t aware of alternatives. I want to offer a suggestion: often we ARE aware of the alternatives. But there is safety in not acknowledging these alternatives. If we don’t know then we don’t have to do anything, so we convince ourselves that we aren’t aware. In fact, many of us are aware of investment alternatives, and we could probably have really educated conversations about them.
SUGGESTION: Don’t convince yourself you don’t know something just to avoid making a decision. Instead, go through the decision making process, perform due diligence, and just decide! If you know about an investment alternative that is great, but you just don’t want to do it, then don’t do it. There is nothing wrong with that. And if you know about something that is good and you want to do it, then do it. But don’t limit your alternatives!
People who convince themselves that they don’t understand the markets.
This is common! How am I going to invest in something that I don’t understand? That is a good question that you probably should ask yourself every day, since most of your current investments actually are in things that you probably don’t understand. Let’s face it: does anyone actually know for certain the random events that could move the markets tomorrow, over the next month, or even the next year? You probably have investments either with a person or an advisory firm that you trust. By default, you are in effect relying on them to “know the unknowable.” Self-direction actually gives you the opportunity to invest in opportunities that you DO have an understanding of, and to invest with people that you really know and trust.
SUGGESTION: Take a look at how you might be using “understanding” to hold you back.
People who are convinced there’s too much risk involved with alternative investments.
This one stops lots of people. Their perception is that self-directed investments necessarily involve more risk than managed investments. This perception is impossible to overcome if you hold this story as fact and allow no room for examination. To paraphrase Henry Ford, if you think self-directed investments are more risky than the stock market, you’re probably right; if you think they are not, you’re probably also right. As mentioned previously, holding that self-direction is more risky could really just be a way to keep you safe from considering it.
SUGGESTION: Allow yourself to have a clear mind with no pre-judgement so you can compare investment options on an objective basis. You may find that in some cases there may be less risk in the self-directed option based on your research, knowledge of the investment, comfort level, and performance expectations.
People who fear a loss of capital with self-directed investments.
Just like the above example, some people have the preconceived notion that capital can be lost in self-directed investments, yet there is no risk (or less risk) with managed accounts. Or they believe it is “acceptable” if money is lost in a managed account, but not OK if it is lost in a self-directed account. Either way it's worth knowing your underlying story and examining if that story will even allow you to compare investments objectively and without bias.
SUGGESTION: As with risk, allow yourself a clear mind with no prejudgment so you can reasonably compare investment options.
About Jason Dukes:
Jason Dukes is a Life Coach and an innovator in personal transformation. As the Founder and CEO of Captains Chair Coaching, Jason focuses on bringing peace to the world by helping people embrace their Gift and Give It To the World. Jason does this by one-on-one coaching, group coaching, public speaking, his social media presence, and his Give Your Gift to the World Book and Seminars. Jason is also the producer of the Uncovering Ourselves Conference Series and Radio Program. Jason has spoken at many conferences, including the AgileIndy Conference, and is published in many media outlets, such as Forbes.com. Further information on Jason and his services can be found at www.captains-chair.com.
Note: This article is not to be taken as financial advice. Jason Dukes is not a financial advisor.
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