Common Strategies for a Self Directed Roth IRA

Utilizing a self-directed Roth IRA can provide you with a great deal of flexibility when it comes to investing for your retirement. Many investors utilize a number of different investment strategies with these types of accounts. Here are a few common strategies for using a self-directed Roth IRA.

LLC

Many people utilize an investment strategy that uses a LLC. The strategy works by having you put money into the Roth IRA and then use that money to invest in the LLC. Essentially, the IRA will be the owner of the LLC. When this happens, you can conduct business with the LLC and all of the profits from your business dealings will go back into the IRA. This allows you to make investments easily and conduct many different business deals. All of the profit that you make will be able to go into your IRA and you will not incur any tax liability as a result of this.

Dollar Cost Averaging

Dollar cost averaging is another investment strategy that many choose to utilize with a self-directed Roth IRA. This is a strategy that involves investing a certain amount of money regularly into a security. Many choose to utilize a no-load mutual fund for the security. This allows you to purchase shares of the mutual fund without incurring any commissions upfront. For example, let's say you decide to invest $500 per month into a particular mutual fund. When the prices of the mutual fund shares are high, you will be buying fewer shares. When the prices are low, you will be buying more shares. When you do this over an extended period of time, you will be averaging out the prices that you pay for the shares of the mutual fund. This allows you to remove timing from your investment portfolio. This approach has been proven to work over the long-term to provide steady returns.

Foreign Currencies

With the self-directed Roth IRA, many people choose to invest in the foreign currency market. A traditional Roth IRA account, typically, does not allow customers to invest in this market. However, when you are in charge of the investments, you will be able to put your money into this market if you choose. The foreign currency market boasts a daily volume of over $2 trillion. Therefore, if you can invest with a sound strategy or fund manager, you can make incredible returns on your investment.

Commodities

By utilizing a self-directed Roth IRA, you will also have access to the commodities market. Many investors choose to invest in the commodities market with funds from their Roth IRA because it allows them to diversify away from the stock market. You can invest in things like oil, gold, silver, wheat and corn in this market. If you know how to trade this market, it also has great potential to provide you with steady returns.

blog comments powered by Disqus