Significance

• A self-directed IRA puts you in control of your investments. While an ordinary IRA allows this to some degree, the self-directed IRA opens up the potential for investments in real estate, precious metals and other non-traditional investments. You direct the investment while the account custodian, such as a brokerage firm or insurance company, holds the money and keeps records of your investments.
  
  

Benefit

• The benefit to a self-directed IRA is that you get a wider range of investment options. If you don't know much about investing in stocks, you can invest in real estate. Most IRAs are restricted to stocks, bonds and mutual funds. But a self-directed IRA allows you to use your own personal investment strengths to design a retirement portfolio that will be best suited to you.
  
  

Warning

• With control comes increased responsibility. You must know what you are doing before you start investing. The brokerage that holds the money for you may not be able to provide much (or any) help with the investments you have chosen through a self-directed IRA. For example, if you purchase real estate in a self-directed IRA, you may require the assistance of a professional real estate investor. If the brokerage acting as the custodian for your money does not have an in-house real-estate investor, you'll likely not get any advice from the brokerage.
  
  

Consideration

• If you are not a skilled investor, or your knowledge of investing is limited, you may want to consider investing in a traditional IRA. A brokerage firm can help you invest in mutual funds or other more traditional investments. While you may not have the same degree of control or choice open to you, you will be assured that you can receive professional advice.