Discover More about a Little-Known, but Powerful Tool to Create Financial Freedom
Investing in Alternatives to the Market with Tax-Advantaged Accounts Could Dramatically Increase Your Wealth – Find Out How…
Welcome to an exclusive club. You are about to learn about a powerful financial tool that only 2% of Americans are currently using. Here’s what you’ll discover:
The little-known tool really isn’t a “new” way to invest (hundreds of thousands have been using it for more than 35 years);
The importance of diversifying your portfolio;
How tax-advantaged investing can supercharge wealth creation;
Getting started is simpler than you think.
But First, Why Are Many People Increasingly Frustrated with Their Ability to Grow Wealth?
The reality of today’s investing environment is this: the stock market is volatile and just leaving money in a savings account and it's anemic returns could allow inflation to cripple your nest egg.
You don’t have to be trapped by conventional investing. Everyday hundreds of thousands of investors take a different approach by investing outside the market in real estate, private businesses, promissory notes, precious metals and many other unconventional investments.
Look no further than The Yale Endowment as an example of how a diversified portfolio can often produce better returns.
In the mid-1980s, Yale’s endowment adjusted its approach from a mix of only stocks and bonds to one that included investments in real estate, private equity, hedge funds, forests and farmlands – earning 15.6% annual returns and not one down year since 1987 (MarketWatch.com – 10/13/13).
It is not just large endowments that have diversified their portfolios. Many of the world’s richest people became wealthy outside the market by investing in real estate, private businesses, and lending money. Check out the breakdown of how some of the world’s billionaires got rich.
Number of Forbes Billionaires Worldwide by Investment Type
Investments in their businesses- 148
Real Estate – 129
Finance - 78
(Forbes.com - published 3/7/13)
Your Financial Future Doesn’t Have to Rely on the Success or Failure of Others or Government Programs
For many, a comfortable financial future is in doubt, not only because of the volatility of the market, but also because of the instability of Social Security, pensions, and other government programs. People can be stuck relying on financial planners or advisors (who may or may not have their best interest in mind) who automatically invest in the market with mixed results for retirement planning.
But some people have decided a different approach is necessary. For more than 35 years, hundreds of thousands of investors have been taking control of their financial future, diversifying beyond the traditional using a little-known, but powerful financial tool – the self-directed IRA.
Since the creation of the IRA in 1974, investing in alternatives to the stock market has been allowed by the IRS (it is spelled out in IRS Publication 590
). For many, investing in real estate, tax liens, promissory notes, lending money, etc. with their IRA has produced remarkable results.
“I invested $5,500 from a Roth IRA in two real estate options that I sold one year later to other investors for a total of $55,000.” – Tom W., New Jersey
“We completed a real estate transaction in our IRA purchasing a property for $100,000 and then sold it for $128,865 in just 10 months, earning over 30% per annum basis.” – Don and Barbara C., Ohio
Self-Directed IRA Benefits Revealed…
An IRA is a government-sponsored retirement plan that allows investments to grow in a tax-advantaged environment. With tax advantages, investments in the IRA can compound over time and potentially be more profitable than the same investment outside the IRA. Combine the ability to compound investment profits tax-free or tax-deferred in an IRA with the advantages of a diversified portfolio and you have an extremely powerful financial tool.
3 Ways Self-Directed IRAs Can Help Investors Create Financial Freedom
True Investing Diversity Could Result in Higher Returns: With a self-directed IRA you can realize true asset diversity and potentially higher returns, investing beyond the market into assets such as real property, tax liens, mortgage notes, precious metals, foreign currency, plus much more. As mentioned earlier, the Yale Endowment Fund and many of the world's richest billionaires succeeded because of a diverse portfolio including investments outside the market.
Tax Advantages = Lasting Wealth: Investing in a tax-advantaged account (tax-deferred/tax-free profits, plus the possibility of large tax deductions) can have a tremendous effect on future wealth – see chart below. Let's see this powerful concept in action:
Your IRA purchases a property that you rehab and sell earning a $20,000 profit. In a Traditional IRA, taxes on your profit are deferred and can be used for future investments. In a Roth IRA, profits from your investments can be distributed to you tax-free. Outside an IRA, your profits are subject to tax and as a result, may lower your profit from $20,000 to $15,000. By using an IRA for your investment, you are able to use your tax-free earnings to create more tax-free earning – a powerful tool to grow wealth.
Create Over 100 years of Tax-Free Growth for Future Generations: Self-directed IRAs allow the passing of assets to beneficiaries after death with little or no tax, allowing you to stretch wealth over generations. Imagine being able to pass all your hard work and effort you have put into increasing your nest egg to your beneficiaries intact.
Note about chart: This example assumes contributions of $4,000 a year, for 30 years, assuming 8% compound interest in a tax-advantaged account vs. an account that is taxed at a 31% rate.
Why Have Self-Directed IRAs Become So Popular...But Large Banks and Brokerage Firms Still Don't Offer Them?
It might seem like self-directed IRAs are a recent phenomenon, but they have been around since the IRA was created in 1974. Investing in alternatives to stocks, bonds, and mutual funds has always been allowed by the IRS (it is spelled out in IRS Publication 590
Self-directed IRAs haven’t received large attention until recently because most custodians who offer IRAs (banks and brokerage firms) don’t offer true self-directing at their firms.
Large banks and brokerage firms typically allow primarily stock-related investments because of the easy of management and ability to charge fees. Frankly, it's just not as profitable for them to allow investments outside of stocks, mutual funds, bonds, and CDs. They make money on commissions from trades, selling investors certain investment funds (that they also get referral fees for) and for assets under management without having to administer more complex transactions and custody of non-traditional investments.
But Equity Trust has been a custodian of alternative investments, such as real estate, since 1983. We are a leader in the industry because we are able to administer and custody alternative assets and facilitate transactions, using a straightforward, simple fee schedule. As more and more investors decide to take control of their financial future and reap the benefits of self-directed IRAs, they turn to Equity Trust.