IRA Alternative Investments

Can you hold alternative investments in an IRA?

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As retirement approaches, many people begin to consider how they can maximize their savings and maintain a comfortable lifestyle after they retire. One popular method is to invest in Individual Retirement Accounts (IRAs), which provide tax advantages and a wide range of assets. While these typically consist of stocks, bonds, and mutual funds, some are now looking into alternative investments to diversify their portfolios and potentially achieve higher returns.

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What Are IRA Alternative Investments?

Alternative investments include assets other than stocks, bonds, and cash, such as real estate, commodities, private equity, and hedge funds. These require a higher level of expertise and carry risk than traditional options, but they also have the potential for larger returns.

In an IRA context, these are simply assets held within an IRA account. This means that the tax advantages of IRAs, such as tax-deferred growth of traditional accounts or tax-free withdrawals for Roth accounts, apply to alternative investments held within the account as well.

IRA Alternative Investments

Why Should You Consider IRA Alternative Investments?

Incorporating alternative assets into an IRA portfolio may provide several advantages. Here are a few examples:


Alternative investments can provide diversification benefits by exposing you to assets that do not always move in correlation with the stock market. For example, rather than being based on stock market trends, real estate investments are influenced by factors such as interest rates, population growth, and local economic conditions.

Higher Potential Returns

Alternative investments provide higher returns. Private equity investments, for example, give access to early-stage companies with significant growth potential, whereas hedge funds may employ complex strategies to generate returns in a wide range of market conditions. However, it's important to keep in mind that higher potential returns also come with a higher level of risk, and you should carefully assess your risk tolerance before holding alternative assets.

Protection Against Inflation

Some alternative assets, such as commodities or real estate, may provide inflation protection. This is because they are less correlated with traditional assets, like stocks and bonds, which can help reduce overall risk. For instance, if the stock market experiences a downturn, your alternative assets may not necessarily follow suit. 

What Are Their Risks?

While the benefits they offer are certainly appealing, they carry significant risks that you should carefully consider. Some of the major risks associated with them are as follows:

  • Inadequate liquidity - Because of their lack of liquidity, you may find it difficult to access your funds in the event of an emergency or unexpected financial need. They are not easy to convert to cash, unlike stocks that you can trade on the stock market.
  • Expensive fees - Management fees, custodian fees, and other expenses are frequently higher in these kinds of assets due to the specialized expertise required to manage them. These fees can eat into returns over time, so it's important to carefully evaluate the costs before investing.
  • Risk of loss - These assets typically have higher risk and may not be suitable to certain financial goals and risk appetites. You should carefully evaluate your risk tolerance and be prepared to withstand potential losses.
  • Potential Scams and fraud - The lack of regulation and complexity of some alternative investments can make them a target for scams and fraud. You should be wary of any asset that promises outsized returns with little risk, requires an upfront payment, and is too good to be true.
IRA Alternative Investments

What Kinds of IRA Alternative Investments are There?

Individual retirement accounts are commonly associated with traditional investments like stocks, bonds, and mutual funds. However, there is a variety of alternative assets that can be held in an IRA, offering potential benefits such as higher returns, diversification, and inflation protection. In this section, we'll explore some of the most popular alternative investments for IRAs, including precious metals, real estate, private equity, and more. We'll also discuss the potential advantages and drawbacks of each investment type to help you make an informed decision about which asset may be right for you.

Precious Metals

Precious metals can be held in an IRA as an alternative option. Precious metals can provide portfolio diversification as well as a hedge against inflation and market volatility. You can choose to invest in precious physical metals such as coins or bars or in exchange-traded funds (ETFs) that track the price of precious metals. However, this entails risks such as price volatility, potential storage fees, and insurance costs.

They are an extremely appealing option for those seeking a stable asset, as these metals have historically served as safe-haven assets for many. If you want to learn more about these and how you can get started in this industry, you're in luck! We have compiled a list of the three best precious metals companies to assist you with any questions you may have and eventually get started with investing in precious metals. They are well-known for providing a quick experience for those looking to open an IRA account with them.


Augusta Precious Metals is a company that specializes in providing customers with access to gold and silver bullion. Its primary goal is to help clients protect their retirement savings through physical bullion or a precious metals IRA. It offers a storage option that allows clients to store their assets in a secure facility. Finally, the company takes pride in its customer service, and clients can work with a dedicated representative to develop a customized strategy. It is important to note that they require a $50,000 initial investment to open an account with them, which may be a turnoff for some.

#2. Goldco

Goldco is a company that focuses on giving clients access to precious metals through their retirement accounts. It specializes in precious metals and provides a variety of options, including coins, bars, and bullion that can be held in your IRA. Their strategy is centered on assisting customers with protecting their retirement savings from market volatility and inflation. They provide a variety of educational resources to help you make informed decisions about your assets, and you can be confident that they are legitimate because they are accredited by the Better Business Bureau. Their features, however, come at a cost. Their fees are higher than those of their competitors, which may not be suitable for those with limited funds. But the quality of their services and products is worth the fees.

American Hartford Gold's investment options include a diverse selection of coins, bars, and bullion, as well as a storage solution that ensures the safety of your precious metals in a secure facility. However, what makes them particularly appealing to customers is that there is no initial investment required to use their services and open an account with them. As a result, they are ideal for those who are just starting out or have limited financial resources. Furthermore, the company is known for its exceptional customer service, with its employees always available to answer any questions.

Real Estate

For many, real estate is a popular alternative asset. There are different ways to invest in property. Some of which are direct ownership of rental properties, real estate investment trusts (REITs), real estate limited partnerships (RELPs), and other real estate funds. It appeals to many as it can provide many benefits, such as cash flow, capital appreciation, and portfolio diversification. However, they also carry significant risks, such as market fluctuations and capital expenditures for maintenance and repairs.

Private Debt

This asset entails lending money to businesses or individuals, frequently through peer-to-peer lending platforms. Through this, you can invest in different debt-based loans such as mortgage notes, car financing, business loans, and personal loans. If you want a consistent income stream that grows tax-deferred or tax-free, consider this option. Loans require promissory notes that outline repayment timelines and interest rates, ensuring that lenders are aware of their responsibilities. However, they come with disadvantages, such as credit risk and borrower default.

IRA Alternative Investments

Private Equity

Private equity is an investment in a private company that is not traded on a public market. This may provide access to businesses with significant growth potential but do note that it also carries a higher risk and may necessitate a longer holding period. However, this is an excellent way to support causes, projects, or people with the same vision, passion, and interests as you. By using a self-directed IRA, you can put your money in a variety of financial instruments, including LLCs, corporations, limited partnerships, REITs, private hedge funds, startups, and private placements. This can provide flexibility and diversification within your retirement portfolio. 

Checkbook IRA

A checkbook IRA eliminates the need for custodian approval for investments, which can lower custodial fees and lengthy transaction delays. You can complete all transactions in your IRA using a physical checkbook, making it easier to access funding, deposit income, and pay bills. This asset is ideal for those who value privacy, speed, and control over their investments. However, since checkbook IRAs are more complex and have numerous paperwork, this is not ideal for beginners. It's also worth noting that checkbook IRAs facilitators can help and guide you in setting up your account but they do not offer financial and legal advice. Thus, you have the flexibility and autonomy to invest in a wide range of assets in real-time with a Checkbook IRA, 

Hedge Funds

Hedge funds are pooled capital from accredited individuals or institutional investors that are invested in a wide range of assets, including stocks, bonds, commodities, and derivatives. They are managed by highly skilled professionals who use advanced strategies such as leverage, short selling, and derivatives trading to generate high returns. Hedge funds are known for their ability to deliver higher returns than traditional vehicles, but they carry a higher level of risk due to their use of sophisticated and complex strategies and high leverage. One drawback of this option is that due to regulatory restrictions, they are only available to accredited investors.


Cryptocurrencies, such as Bitcoin and Ethereum, have grown in popularity as an alternative option in recent years. However, they have experienced significant price swings over the years, with sudden and drastic fluctuations in value. For instance, in late 2017, Bitcoin reached a record high of nearly $20,000 per coin, only to drop to around $3,000 in a matter of months. This kind of price volatility can result in significant gains or losses and can make it challenging to predict future returns.

Additionally, they are not yet regulated in the same way as traditional assets. Thus, when holding this type of asset, you are vulnerable to fraud, hacking, or other security risks. While cryptocurrency, can be held in an IRA, not all custodians allow this kind of asset, so make sure you check with your provider before you make plans to convert your money into this asset. 

Before making any decisions, you should carefully evaluate the risks and potential benefits of each type of alternative asset you can hold in an IRA, and consult with a financial advisor.  A knowledgeable custodian can assist you in ensuring that your assets are in accordance with IRS regulations for IRA accounts. This is to avoid any penalties that can minimize your returns. It's also critical to understand how these assets fit your strategy, fees, benefits, and risks associated with each investment. 

IRA Alternative Investments

How to Invest in These IRA Alternative Assets

  • Open an Account - To hold this kind of asset in your portfolio, you need to have a self-directed IRA account. Unlike traditional IRAs, It provides a broader range of investment options as alternative assets can be held in this type of account. To open a self-directed IRA, you must work with a custodian who specializes in this industry and can assist with managing and other administrative tasks concerning your account.
  • Do Research - Typically, the custodian will provide a list of IRS-approved assets that you can consider putting in your account. You should carefully review this list and conduct due diligence on them as they have different characteristics. This ensures they align with your objectives and risk tolerance.
  • Pick an Asset - Before putting any money in alternative assets, you should consider factors such as their historical performance, fees, and possible returns. Also, ensure that they comply with IRS regulations, as certain prohibited transactions and investments, such as collectibles, may result in tax penalties.
  • Inform your custodian on what you want to purchase - Once you have chosen a suitable alternative asset to include in your IRA, the custodian will facilitate the purchase of your assets and handle any necessary administrative tasks, such as filing tax forms and maintaining records.
  • Manage your assets - It is important to note that alternative assets held in an IRA necessitate a long-term horizon as well as a willingness to accept potential losses. They are frequently illiquid and may necessitate a longer holding period than traditional options such as stocks. Be sure to also check your holdings regularly to ensure they are gaining profits.

Final Thoughts

In conclusion, alternative investments can provide IRA holders with a way to diversify their portfolios beyond traditional stocks, bonds, and mutual funds. While these may carry higher risks and fees, they can also offer potentially higher returns and greater diversification benefits. It's important to carefully consider your risk tolerance and goals before allocating a portion of your IRA funds to this type of asset.

Working with a reputable financial advisor or IRA custodian is beneficial, especially if you are new to these. They can help you navigate the complexities of the industry and make informed decisions about your IRA portfolios. Aside from this, they can offer guidance to ensure that your account is in compliance with IRS regulations. Ultimately, alternative investments can be a valuable tool for you seeking to expand your horizon and achieve your long-term financial objectives.