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This article was created in partnership with Yieldstreet, a leading alternative investing platform. Equity Trust clients can connect to Yieldstreet via WealthBridge to access a wide range of alternative investments for their retirement accounts.
Alternative investments continue to gain momentum in retirement accounts.
As economic uncertainty lingers, investors are increasingly adding private market alternatives to their retirement portfolios using self-directed IRAs to help diversify and provide potentially more stable returns than offered by stocks and bonds.
To better understand investment preferences in 2023 for self-directed IRA account holders, Equity Trust and Yieldstreet surveyed more than 120 high-net-worth investors in March. Here are their picks for the top alternative asset classes in a retirement account.
Real estate is likely the most well-known alternative investment — and the most popular among surveyed self-directed IRA holders.
Within real estate, there are a range of property types to choose from. Classifications include single-family, multi-family, retail, industrial, office, hotels, self-storage, and land.
Real estate investments typically include a business plan or steps that will be taken to generate value for investors. Strategies may fall into categories such as “Core” (buy and hold), “Core Plus” (light renovations, management efficiencies, etc.), or “Value-Add” (major renovations). More work needed generally equates to more risk.
Real estate investors can generate regular income from rent payments and capital appreciation when a property is sold.
While it is common for investors to own a single property in their retirement account, there are more options than ever to access commercial real estate via fractional ownership or REITs (real estate investment trusts).
Next up is private equity (PE) and venture capital (VC), which involve purchasing stakes in private companies.
PE deals entail acquiring shares of a business that is not listed or traded on a stock exchange. It could also be a buyout or taking a public firm private. The ultimate goal of PE investments is to acquire a controlling interest, run the company, and sell it at a profit.
VC is a form of PE that is used to provide funding to early-stage companies with high growth potential. A typical VC deal provides funding to a company that is innovative or disruptive, seeking outsized returns and potentially an exit at a later stage of the company’s development.
Investors can either directly purchase private shares of an individual company or invest in diversified funds of many companies.
As companies stay private longer and see alternative forms of capital, you can access a broader opportunity set by investing in PE.
Private credit is when a non-bank lender, such as a retirement account holder, provides a loan to a company. In exchange, the lender is paid regular interest payments.
Loans are typically either fixed-rate — borrower pays a constant interest rate throughout the lifetime of the loan — or floating-rate — borrower pays an interest rate depending on a benchmark rate, such as the London Interbank Offered Rate (LIBOR).
Private credit can be advantageous as it can pay a higher interest rate than can typically be achieved via traditional fixed income. As the Federal Reserve has hiked interest rates, the yield private credit pays have largely risen as well.
Private investors may also have access to higher-quality loans than previously available as major banks tighten their lending requirements due to economic uncertainty.
When the public markets waver, demand tends to spike for precious metals like gold, silver, platinum, and palladium.
While all investments are subject to volatility, precious metals tend to be among the more stable investments and function as a store of value. The tradeoff: Generally lower returns.
It is important to note that the IRS has certain restrictions on precious metals in an IRA, such as the types of metals you can own and how they are stored. Metals have purity standards that must be met to qualify for a retirement account.
Since Bitcoin launched in 2009, more than 200 cryptocurrencies have become available. While highly volatile, crypto can help diversify a retirement account.
Cryptocurrencies do not have a central regulating authority. Instead, when you transfer crypto funds, the transactions are recorded in a public ledger, also known as a blockchain.
Many cryptos have experienced historically high gains, but also significant losses.
You can now invest in private market alternatives with your Equity Trust account in just a few clicks.
Through Equity Trust’s new WealthBridge portal in myEQUITY, you can browse a broad range of alternative investment options from Yieldstreet, including many of the assets listed above. Investments can be made in minutes — no forms or manual transfers needed.
Video: Connecting to Yieldstreet through myEQUITY
Learn more about adding alternative investments to your retirement account with Equity Trust and Yieldstreet.
Equity Trust receives compensation for investments made by their clients in Yieldstreet products, creating a conflict of interest. Equity Trust is not a client or investor in any Yieldstreet products. Read more.
Yieldstreet is not an affiliate of Equity Trust Company (“Equity Trust”). As Equity Trust is a directed custodian, like any investment, it is your responsibility to conduct your own due diligence before investing and before choosing a provider that is right for you. Investing involves risk, including possible loss of principal.
Equity Trust makes no recommendation or representations as to any provider or the needs generally of any IRA owner or any IRA. Any information communicated by Equity Trust is for informational purposes only and should not be construed as tax, legal, or investment advice. Clients are in no way obligated to invest with Yieldstreet and are free to select any provider or investment as they deem appropriate. No customer may rely on any statement made by Equity Trust or any of its officers, directors, employees, or agents for any decisions regarding Yieldstreet. Whenever making a decision related to your account, please consult with your tax, financial, or legal professional.
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