Basics of a 
Self-Directed IRA

So what exactly is a Self-Directed IRA, or SDIRA? One of the hardest things for people to understand that legally there is no such thing as a self-directed IRA. Neither the IRS or Congress recognize a self-directed IRA as a legitimate account. So the question is, why do people and custodians use the term “self-directed IRA” if it isn’t legitimate?

Essentially, retirement custodians use “self-directed IRA” as a descriptive term to indicate to clients that they can choose the investments in the account. When you set up a Traditional IRA or Roth IRA, most custodians will assign you a financial advisor. This advisor will choose your investments for you based on your 
risk tolerance. If you elect not to have an advisor, you can instead take full control of your IRA and select the associated investments yourself — thus the term “self-directed IRA.” Next, let’s talk about what you can invest in with a self-directed IRA.

Believe it or not, an IRA can invest into just about anything. This means that when setting up a self-directed IRA, what you are allowed to invest in is up your custodian. Custodians typically fall into two categories: public investing and private investing. Most people are more familiar with setting up self-directed IRAs through public custodians, but this is due to them being big-name brands with a lot of familiarity. Some examples of public custodians that offer self-directed IRAs are Fidelity and Charles Schwab. Public custodians will allow you to set up a self-directed IRA and use it to invest in public assets such as stocks, bonds, mutual funds, annuities, REITs, and more. Ultimately, a self-directed IRA with big brand companies can only invest in those kinds of public assets.

However; there are custodians out there who offer a self-directed IRA that will allow you to invest into alternative investments like real estate, cryptocurrency, mineral rights, and more. These custodians are truly the ones that exemplify the term “self-directed IRA.” They typically do not provide any investment options for you to choose from, like public custodians. This means that you truly have to find your own investments, do your own due diligence, and make the decision about what to invest in with your IRA.

Most truly wealthy people have built their wealth using a self-directed IRA. They take true control of the investments that they choose. They do not have a financial advisor that invests the money for them. Instead, they invest in things they know best, are tangible, or that they can control.


  1. Self-directed IRAs are not recognized by Congress or the IRS.
  2. Self-directed IRA is essentially just a marketing term used by retirement custodians.
  3. There are two types of custodians that offer self-directed IRAs: public (big-brand companies that offer stocks, mutual funds, etc.) and private (small businesses that can offer alternative investments).
  4. Real wealth is created when you take control of your funds, instead of a financial advisor who may or may not have your best interests at heart.

Investing is not nearly as difficult as it looks. Successful investing involves doing a few things right and avoiding serious mistakes.

Warren Buffett
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