Self Directed Roth IRA

What is it?

A Self Directed Roth IRA is a Roth IRA that you are fully in control of.  This means that you control which investments you would like to purchase using the funds that you have contributed to your savings account.  A quick reminder, remember that an IRA is just an investment vehicle, and while it does offer certain features, its effectiveness depends on how well the investments perform.

Benefits and Alternatives of a Self Directed Roth IRA

The alternative to a Self Directed Roth IRA is to pay a percentage of your account to your broker and they will handle all of the investing for you based on the risk level you tell them you will accept.  This alternative obviously has benefits since a professional will be taking care of your money and will in most cases have more knowledge than you in this particular area of expertise.  However, some people (like me) want more control over their personal finances, which is why you might prefer the Self Directed Roth IRA.

When you are in full control of your funds you know exactly where all your money is at all times and how much you have.  When your money is in the hands of someone else you will not have up to the minute updates on your retirement fund.  Also, even though the fee seems small (<5%), keep in mind that when you can be dealing with tens or hundreds of thousands of dollars, this amount can really add up.

Is a Self Directed Roth IRA for You?

Basically the question comes down to how effective you think you can handle your money and if you even want to.  Some people detest having to read financial news every day and stay up to date, while others love it.  The most important thing in making this decision is that you have to be 100% confident in your ability and discipline to manage your account or you will be better off deferring to someone who has more experience in the field.

What Should I do If I Have a Self Directed Roth IRA?

If you have a self-directed account there are a few things you must do.  First of all, keep up to date with news in the financial sector using television, the newspaper, or even the radio.  Secondly, take advantage of your resources.  You can read books about investing at your library, but also remember and take advantage at the wealth of information online.  One final note about this, be careful at who you take advice from, while there is a lot of quality investing information out there, there is also a lot of useless advice floating around.  Before implementing any strategy make sure that it makes sense to you, and if you aren’t 100% sure get help from a stock broker or an expert in whichever field you are investing in; remember, this is your future you are investing with, be smart!