Managing a self-directed IRA doesn’t have to be like air traffic control at a busy airport. Using a few techniques and technology, your self-directed IRA can help you meet your investment objectives in a nonharried, orderly manner. Even though self-directed IRAs have nearly unlimited investment choices and can have low trading fees, you don’t need to research every opportunity available. Because only a fraction of the available choices meet your investment goals, it’s best to begin the process by focusing on what you want for yourself.
Write down clear, reasonable goals with a set time frame. The Financial Industry Regulatory Authority recommends beginning any investment plan with a clear marriage between your goals and investments. To do this, you’ll need a clear picture of what you want so that it’s easy to weed out the thousands of investments that don’t fit the goals you have for your self-directed IRA.
Find investments that meet your goals. Investors who prefer diversification and professional management choose among the many mutual funds available. Investors who want to trade more often or prefer lower internal fees and don’t care for professional management like exchange-traded funds. These funds, called ETFs, are comprised of a basket of investments that track an index, such as the Dow Jones Industrial Average. Investors who don’t mind the added risk of researching and picking individual investments will use individual stocks or bonds for their self-directed IRA.
Research your investment watch list. Mutual funds are easily chosen from screening tools available from popular financial sites such as Yahoo! Finance. Sort your funds by manager tenure, fees and historical returns to start finding quality investments. Use sites such as E*Trade Clearstation and MarketWatch BigCharts to screen news, financial data and charts for individual stocks and exchange-traded funds. Look for price trends, management upheaval and product development news to start finding good choices for your self-directed IRA.
Invest in a diversified collection of investments. To meet your goals with less risk, invest in several different funds, ETFs, stocks or bonds. Thus, if a single investment doesn’t perform as expected, you haven’t built your whole portfolio expectations on the underperformer. Try to spread out your purchases over several days to avoid buying all your positions on a market-high day.
Monitor your portfolio. Track your investments to ensure that you’re keeping up with your goal for the self-directed IRA. Compare your fund and ETF results against their benchmark index, which you’ll find in the literature about the fund or ETF. Compare your stock performance to other companies in its peer group. If you’re worried about volatility, place stop orders on your stocks and ETFs. This will automatically sell your investments if the market drops suddenly below a point you’ve predetermined. Because mutual funds only trade once daily, you cannot place a stop order on a fund.
As a former financial advisor to companies and individuals for 16 years, Joe Andrews knows financial planning and marketing from start-ups to personal budgets. He also writes on motor racing, board games and travel. Andrews received his B.A. from Michigan State University in English. He is currently working on a young adult novel.