Stocks, bonds, and mutual funds are widely recognized as the building blocks of any retirement account, but what if you’re looking for more from your portfolio? What are Alternative Investments?

Alternative investments are non-traditional assets that can only be held in a self-directed retirement account. These assets, which include real estate, cryptocurrency, and precious metals, are often credited as offering the potential for higher returns. As such, they may be an attractive option if you’re looking to amplify your retirement strategy.

How to Invest in Alternative Assets Inside An IRA

You cannot hold alternative assets in a standard IRA. Instead, you need to open a self-directed IRA (SDIRA). These flexible retirement accounts allow you to invest in a range of alternative assets you may wish to add to your portfolio.

Once your SDIRA account is open, you can select the assets in which you’d like to invest and direct your custodian to execute the transaction.

11 Alternative Investments You Can Make with an SDIRA

Think an SDIRA may be the best option for your retirement goals? Here are 11 assets that you can hold in your account:

1. Real Estate

Real estate is an increasingly popular asset because it can provide a steady, passive income while sustaining long-term portfolio growth. Income generated from real estate is tax-free or tax-deferred, depending on the type of SDIRA you have, and can include rent or lease payments as well as capital gains from property sales. Self-directed real estate investments can include:

• Residential or commercial rental properties.
• Fix-and-flips, or properties to renovate and sell.
• Raw land.
• Real estate investment trusts (REIT).

2. Cryptocurrency

SDIRAs can hold cryptocurrency, including Bitcoin, Ethereum, and Dogecoin. Cryptocurrency can offer the potential for high returns as markets swing, but investors should also be aware of the market volatility and the potential for increased risk. With cryptocurrencies racing to all time highs, now has never been a better time to partner with a Bitcoin custodian to protect your assets with a SDIRA.

3. Precious Metals

Precious metals like gold, silver, platinum, and palladium are popular IRA assets because they make it easier for investors to hedge against market volatility and inflation. Precious metals included in an SDIRA portfolio must be held in an approved depository and meet IRS purity standards.

4. Private Equity

Opening an SDIRA account unlocks the option to invest in privately held companies. You can invest in a range of private companies, including start-ups and buyout opportunities. Leveraging IRA funds to add private equity to your portfolio can yield substantial growth, as you can capitalize on immense growth and strategic business shifts. However, it’s important to note that these investments are less liquid than others and should be considered a long-term strategy.

5. Trust Deeds and Promissory Notes

If you want to leverage real estate as a portfolio asset but don’t want to take ownership of a property, consider investing in trust deeds and promissory notes. In this case, you act as a lender: the property owner issues payment, and your earnings stem from paid interest. If the property owner fails to repay the debt, you can take possession of the property.

6. Tax Liens

Tax lien investments allow you to purchase liens that municipalities place on properties when owners fail to pay their property taxes. As an SDIRA asset, tax liens can yield high returns through interest payments or, if the owner fails to meet the repayment requirements, property ownership.

7. Private Lending

If you have an SDIRA, you can act as a private lender, issuing loans directly to an individual or business. As the lender, you can determine the lending terms, such as interest rate and repayment period. You can also choose the borrower, performing due diligence, such as background and credit checks, to reduce the risk of delinquency or default. Earnings stem from the interest as spelled out in the loan agreement.

8. Venture Capital

Another way to use alternative assets to diversify your retirement account is by providing funding to early-state startups or growing companies in exchange for equity. Venture capital investments are considered high-risk, high-reward opportunities. When a company experiences success and rapid growth, the gains can be substantial. However, if a company struggles or fails, the opposite can be true.

9. Oil, Gas, and Mineral Rights

When you invest in oil, gas, or mineral rights with an SDIRA, you purchase the rights to extract natural resources found within a specific plot of land, generating income from lease agreements or royalties. Though these assets can be lucrative, value can fluctuate based on commodity pricing, and managing these assets can be complex.

10. Equipment Leasing

If you’re looking for a way to create a steady stream of passive income for your SDIRA, consider equipment leasing. In this case, you purchase equipment, such as vehicles or machinery, and lease it out to businesses in exchange for regular rental or lease payments. Similar to private lending efforts, performing due diligence on potential renters can help reduce risk, such as delinquency.

11. Commodities

Investing in tangible assets, such as agricultural products, oil, natural gas, or metals, can provide diversification while making it easier to hedge against inflation or market volatility, especially if you have specialized knowledge in a specific sector. Commodity investments can be complicated by specific storage rules, environmental concerns, etc., so it’s wise to work with a custodian familiar with this type of investment.

How to Open a Self-Directed IRA

Opening a self-directed IRA is easy, and only requires a few more considerations when compared to opening a standard Traditional or Roth IRA.

1. Choose a custodian that offers SDIRAs. While you can commonly open a standard IRA with a bank, brokerage, or range of other financial entities, SDIRAs aren’t always as widely offered.

SDIRA custodians must be approved by the IRS. And though they do not offer investment advice, they will provide custodial support and work to ensure your account meets the necessary IRS regulations. As such, it’s important to choose a custodian who has experience with the type of asset(s) you wish to hold in your account.

2. Choose a type of account. In general, you can choose between a Traditional or Roth IRA. Traditional accounts are funded with pre-tax dollars, and funds grow tax-deferred while in the account. Qualified withdrawals are subject to income tax. Roth accounts are funded with after-tax dollars, and growth, as well as qualified withdrawals, are tax-free.

There are also other types of retirement accounts, like SIMPLE IRAs and SEP IRAs, that can be self-directed. Speak to your custodian about the options available and which are best for your needs.

3. Complete an application. Once you choose a custodian, you’ll need to complete an application. To do so, you’ll likely need personal information, like your social security number, beneficiary information, and account information if rolling or transferring funds from one account to another.

4. Fund the account. You can fund your account in several ways, including rolling or transferring funds from a similarly structured IRA or 401(k) or making a contribution via a savings or checking account.

Keep in mind that all IRAs have an annual contribution limit, but transfers and rollovers do not count toward that limit.  In 2025, the annual contribution limit is $7,000 ($8,000 if you are 50 or older), though Roth accounts have additional limits based on your income and tax filing status.

5. Choose your investments. Once funded, you can leverage funds to invest in a range of traditional and alternative assets.

Using a self-directed IRA to invest in alternative assets is easy and can be lucrative. Perform your due diligence and partner with the right custodian to get started!

FAQs

Are there restrictions on what I can hold in an SDIRA?

Yes, there are some IRS-set restrictions on what you can hold in an SDIRA. Self-directed accounts cannot hold the following types of assets:

• Collectibles, such as art, stamps, antiques, and coins (depending on if it meets IRS-mandated purity levels to qualify as a precious metal).
• Life insurance policies.
• Assets for personal use or gain, such as vacation rentals, residential property, or office space you plan to use.
• Assets purchased from or leveraged by disqualified persons, such as a spouse, child, business partner, or account custodian.

Can I live in or use property held in my SDIRA?

No, you cannot live in or use a property held by your SDIRA. Doing so is considered an act of self-dealing and is strictly prohibited by the IRS. Similarly, disqualified persons, such as a spouse, parent, child, or financial advisor, are barred from living in or using property held in your SDIRA.

Do I need a custodian for my SDIRA?

Yes, you must have an IRS-approved custodian for your SDIRA. Though custodians cannot offer investment guidance or advice, they do perform some important tasks, including account custodianship, ensuring asset purchases and investments are following IRS rules, and maintaining records for IRS compliance.