What is Self-Directed IRA?

Many people who happen to start planning for their Individual Retirement Account, have often heard about the term Self-Directed IRA. For those who think of diversifying their account, this article will help you understand self-directed IRA, the prohibited assets and the assets allowed. This will also help you plan roll-over some of your funds to gold or any precious metals.

Self-Directed IRA – Definition

If you’re an IRA owner, the self-directed IRA gives you the option to choose on how or where you want to invest your funds, contrary to what retirement plan managers do. Though these administrators will give you advice – the decision lies on yourself on how or where you want to diversify your account. The self-directed IRAs are actually investments that you can readily have like stocks, real estate, bonds, mutual funds and precious metals to name a few.

Prohibited Asset Types for Self-directed IRA

The Internal Revenue Code did not actually specify what you can invest in self-directed IRAs, but on what you cannot invest. The Internal Revenue code 408 specifies the following prohibitions:

  • Life insurance
  • Antiques
  • Rugs
  • Artworks
  • Stamps
  • Gems
  • Metals (except for the approved precious metal bullions)
  • Coins (except for the approved and mint by U.S. Treasury)
  • Alcoholic beverages (like special wine, vodka, etc)

Allowed investments for self-directed IRAs

As mentioned, though the Internal Revenue agency did not specify particular assets, the following options are accepted and widely permitted in the industry:

Major asset options

  • Precious Metals
  • Franchises
  • Mortgages
  • Stocks
  • Partnerships
  • Bonds
  • Tax liens
  • Private equity
  • Real Estate

Real Estate assets include

  • Commercial properties (U.S. and International)
  • Residential properties (U.S. and International)
  • Raw land
  • Farm land
  • Property development

Other notable investments

  • Hedge funds
  • Commercial paper
  • Commodities
  • Foreign stock
  • Equipment & leases
  • Royalty rights
  • American depository receipts
  • US Treasury bills


The IRS has certain provision on the transactions that involve a self-directed IRA. They do require that for such transactions, either a custodian or trustee that holds the IRA assets (in behalf of the owner), be qualified or have a license.