7 Step Strategy for Successful Self-Directed IRA Investing

by | Oct 25, 2021

A self-directed approach offers more choice and control for investors, and it’s easier than you might think.

Many investors don’t realize that advisors have commission incentives to sell certain investment products. That means your hard-earned money can end up in an investment that doesn’t align with your goals.

This can result in years – maybe decades – of underperforming returns.

The problem with traditional IRA investments doesn’t lie solely on the broker’s shoulders. Most IRAs severely limit your choices. These plans tend to provide only a handful of options.
So if you’re not self-directing at least a portion of your retirement funds, you are missing out.

Your future is being steered by a plan administrator or a broker motivated by commission. Sure, there are new fiduciary rules that try to prevent this. But some administrators will still prioritize their needs ahead of yours.

That’s why investors like you are increasingly curious about self-directed IRA investing.

  • Maybe you’re already enrolled in a 401(k), a traditional IRA, or a Roth IRA. But you want more options.
  • Maybe you have a particular investment idea you want to explore.
  • Maybe you’re simply tired of being locked into a limited selection of stocks, bonds, and mutual funds.
  • Maybe you want to limit the number of investments managed by someone else.
  • Maybe you want to protect your savings from a volatile stock market or unpredictable changes in the economy.

No matter which of these “maybes” is motivating you, you’re wise to be researching all about self-directed IRA investing.

Investors seeking more information about investing with a self-directed ira will find it here. You’ll even have seven straightforward steps to get yourself started.

Self-directed IRAs: Back to Basics

Going back to basics here for just a moment. Retirement accounts can take many forms.

Investors can self-direct investments in many ways:

  • Self-employed individuals have the option to fund a solo self-directed 401(k). But this is only available to self-employed people.
  • Self-directed IRAs, however, are available to anyone who earns income or has funds in an existing retirement account that can be rolled over to an IRA.

IRA stands for an individual retirement account and is available from most financial institutions. Typical IRA offerings include:

  • Stocks
  • Bonds
  • Mutual funds, including exchange-traded funds and index funds

A self-directed IRA (SDIRA) provides investors with additional options. Getting started is easier than you might think.

Self-Directed IRA Investing in 7 Simple Steps

Step 1: Organize Your Statements

57% of investors don’t know what investments make up their portfolio. [1]

Gather your 401k, IRA, and existing brokerage account statements together. Whether your most recent statements are in paper form or digital, create one master list.

Then review those statements. Take this opportunity to review each account one at a time:

  • Accounts created with former employer accounts
  • Existing IRA accounts
  • If you own a business, the 401k from that business
  • 401k with your current employer
  • Other savings or brokerage accounts

Refamiliarize yourself with the contents of each account. This will help you get a handle on how much you’d like to transfer or contribute to your SDIRA.

Step 2: Understand Which Accounts Can Be Rolled Over

Now it’s time to dig a little deeper.

It’s time to find out which accounts are good candidates for self-directed IRA rollover.

Accounts from former employers

Begin with former employer retirement accounts. When you change careers, you take a retirement plan offered by your former employer with you.

Once you leave an employer, you can now roll over old 401k accounts to your own individual retirement account. That account can become your self-directed IRA.

Existing IRA accounts

The next candidate for self-directed IRA investing is the existing IRA accounts that you hold.

These can be traditional IRA accounts you have at your bank. You might also hold an existing IRA account at one of the brokerage firms.

Solo 401(k)

Another type of account that could be rolled over or self-directed is a 401k plan for a self-owned business. If you’re a solo business owner, you might have a 401k plan sponsored by your company. This is a plan that you solely control.

If you have a larger business with employees, you might offer and control a 401k plan there as well.

Accounts with existing employers

Finally, your existing employer’s retirement plan will often be a 401k plan. Of course, as soon as you hit retirement age, you can undoubtedly rollover your account to a self-directed IRA.

Now a rollover becomes a bit harder while you’re still working for that employer. There are quite a few options and exceptions that facilitate rollovers:

  • Many of the more generous employer plans are liberal as you near retirement age. If you’re over 50 or over 55, some of these plans will allow a partial IRA rollover, even though you still work for this employer.
  • As you approach 59 and a half, some IRS regulations allow you to do a rollover, even though you’re with your existing employer.

Depending on the plan, there are a few ways to use money from your employer-sponsored plan:

  • Some plans will allow borrowing for medical expenses.
  • Other plans allow borrowing without requiring a reason.

Now with any type of borrowing, there is usually interest involved. But there’s something cool about this kind of borrowing.

Your retirement account receives that interest payment. Essentially you’re paying yourself interest.

That’s an interesting way to get a little bit more in your retirement account by borrowing some of the money you’ve saved. Then you can reinvest that money if you find an opportunity that is more aligned with your investment goals and values.

Step 3: Open a Self-Directed IRA Account

You’ve organized your accounts. You’ve figured out which funds to self-direct.

Now it’s time to open the SDIRA. Here are a few things you should consider as you do this:

  • Opening more than one. You may need to open more than one SDIRA. If you’re rolling over money from a Roth IRA, that Roth money needs to be kept separate from your traditional IRA money.
  • Cost. SDIRAs cost a few hundred dollars to maintain each year.

These costs include transaction fees and, depending on the account being managed. There will also be trustee fees. If you have good investments in your SDIRA, the fees will be worth it.

Step 4: Identify a Custodian

Once you have determined what type of self-directed IRA accounts you want to open, you’ll want to go ahead and identify a custodian that can help you.

(Sometimes, the term trustee can also be used, but we’ll stick with the custodian for now.)

Custodians of self-directed IRAs are often companies that specialize in these types of IRAs. A custodian can be a bank or a trusted company.

According to the rules on self-directed IRA investing, a qualified custodian must process the transactions for self-directed accounts. The custodian then holds the assets and keeps records for the IRS.

There are larger entities that can handle this, like Equity Trust Company. Then there are smaller firms, like Forge.

It’s important to mention that we do not have any affiliation with either of these companies- financial or otherwise. We say them only because our customers have used these custodians and had good experiences with them.

Different custodians will allow other types of assets. Be sure to discuss terms when choosing a custodian.

Once you have opened your account and identified a custodian, it’s time to put money into the SDIRA with a rollover or a contribution.

Custodian or account manager for self-directed IRA

Step 5: Understand Contribution Limits

Let’s once again go back to basics for just a moment:

  • IRA contributions are simply funds you’re depositing into the SDIRA.
  • IRA rollovers are funds coming from other retirement accounts.

It’s important to clarify this because there are contribution limits on money going into the self-directed account. But there are no limits on the rollovers. [2]

When it comes to rollovers, it doesn’t matter how much money you have in your existing retirement accounts:

  • You can execute a partial rollover from one of your existing accounts that we identified in Step 2.
  • Or you can decide on a complete rollover. This means you’ll close the account that you’re rolling over. All of your funds will be rolled over into your new self-directed IRA account.

Step 6: The Fun Part – Selecting Your Self-Directed Investments

Now comes the fun part.

If you understand investing, particularly in specific industries, you can diversify your portfolio by taking advantage of higher yields.

Making Loans

Some investors will use their self-directed accounts to make loans (or write notes) and earn interest. Whether it’s a real estate loan or a hard money loan, this is becoming a popular option.

By investing in a self-directed IRA with notes, you can select the types of investment loans you want to make.

I, personally, do some online lending through these newer platforms called Prosper and LendingClub. You can lend unsecured loans to people. The loan recipients often use the funds to refinance their credit card debt.


Investing in a new business with your self-directed IRA can be one of the best strategies to try, especially for those interested in real estate self-directed investing.

We’ve watched our customers and investors enjoy success by investing in a cannabis startup with their self-directed IRA accounts. You can invest in businesses, as long as they’re a C Corp or an LLC.

Cannabis is a new, emerging market that has socially responsible investing goals.

Investors have an exciting opportunity with self-directed IRA investing in cannabis. They can participate in the medical cannabis revolution that’s happening across the country. It’s all possible with a self-directed IRA account.

Private Equity

Some funds or individual stocks have not yet been approved for trading on a public exchange. But with private equity investments, you can invest in those funds or stocks privately.

Early investors might get in on a “friends and family” offering when shares typically sell for less than a dollar.

This investment option is called private for a reason. Some private placements never reach the radar of the ordinary investor.

Ordinary investors don’t often participate in private equity for a few reasons:

  • They’re locked out unless they know one of the founders.
  • They perceived the risks involved to be beyond their comfort zone.
  • Investors must be financially sound enough to stomach significant risks.

But some investment advisors, holding funds, and crowdsourcing options are putting this option in closer reach.

Environmental, Social and Governance (ESG) Investing

This kind of investing was once an extremely niche sector. Now it can take several forms:

  • Sometimes, the strategy seeks to avoid specific “sin” industries. Sin industries include weapons, tobacco, and alcohol. Investors aim to avoid industries that involve products that can cause harm to others.
  • Investors will avoid companies because of their lobbying efforts.

Common investments include:

  • Solar and wind energy
  • Water power
  • Biofuel
  • Energy-efficient housing/buildings

Other options

In addition to making loans and self-directed IRA investing in LLCs, you can also invest in all the standard options like publicly traded stock, bonds, mutual funds, etc.

But now you’ve got more choices. Now your investment choices include:

  • Art galleries
  • Cannabis
  • Cryptocurrency
  • Crowdfunding
  • Improved or Unimproved Land
  • Retirement homes
  • Storage spaces
  • Show horses
  • Vineyards

Some of the best strategies for investing with a self-directed IRA include opportunistic investments. These kinds of investments are perfect for a Roth IRA.

Let’s say you invest in a startup company that ends up selling for many times what you had invested.

  • You’ll have what’s called a windfall gain.
  • If that gain is inside a Roth IRA, you may never pay taxes on that money again, even when you withdraw it. That’s huge.

Step 7: Send a Direction Letter to the Custodian

You’re almost there. Now it’s time to make the trade. You’ll do this using a Direction Letter.

The custodian can only execute investment transactions upon your direction.

A Direction Letter instructs the custodian to make investments on your behalf.

Many custodians now have direction letters available online. It’s very easy to DocuSign the direction letter.

Just so there are no surprises, it’s essential to understand how ownership of the plan is structured. The investment will be in the name of your retirement account, not in your name personally.

For example, if you were using Equity Trust Company, the investment in the company or the loan beneficiary maybe would sound something like Equity Trust Company for the benefit of John Smith’s IRA account. That’s how the title would appear on any deeds of trust or real estate that you owned in your individual retirement accounts.

Identifying the Best Strategy for Self Directed IRA Investing

Taking control of your investment strategy using a self-directed IRA can open up a wealth of possibilities. The best approach, however, will vary depending on investor goals, values, and experience.

Investors who are realistic about how well they know the market will find the best strategy.

Self-directing investing puts you in the driver’s seat as the portfolio manager.

  • This can be an advantage for investors with experience and confidence in an industry.
  • Investors that have confidence in the industry but lack experience can still do well. They may, however, need some additional guidance.


Young people entering the workforce used to funnel directly into the company retirement plan. But that is changing.

More and more investors are striking out on their own. And more investors are now self-directing their investments.

But it’s easy for curious investors to become overwhelmed. They’ll see the many self-directed options available to everyday investors. Many will not know how to choose the right options.

With so many choices, the question becomes, where are the best opportunities?

We’ve analyzed the wide array of self-directed opportunities. We conclude that companies that show the following characteristics have the highest potential:

Criteria for Investors:

  • Led by an exceptional management team with a proven track record of success
  • Have experience in the ancillary sectors of the industry (ex., science, real estate, licensing, etc.)
  • Show potential for high growth and the ability to scale
  • Able to sustain their competitive advantage over time
  • Avoid taking speculative risks
  • Address problems that will continue to exist even after regulatory changes ease any constraints on the industry
  • Have goals established for environmental, social, and governance standards and how to implement them

Private opportunities do exist. But these opportunities generally require capital investments beyond the capacity of the everyday investor.

However, everyday investors lucky enough to cross paths with the right people can tap into those opportunities with private placements.

Using the material in this document as a guide should help you navigate this exciting time as an investor.

For further information, book a complimentary consultation with Gladbrook’s Founder, Warren Blesofsky.

Learn More

Click here or send an email to info@gladbrookholdings.com to learn more about private placement and self-directed investing opportunities available to everyday investors.

With headquarters in Long Beach, California, Gladbrook Holdings is a relationship-driven investment company. We serve private investors by providing alternative investment opportunities in the emerging California cannabis and sustainability ESG sectors.

The Cannabis Holding Fund is our leading investment portfolio opportunity. It includes a robust group of early-stage California cannabis businesses. Each business has outstanding leadership and management teams in three categories: 1. real estate, 2. intellectual properties & licenses, 3. sales & operations.

Photo of Warren Blesofsky, Co-Founder & President, Gladbrook

Warren Blesofsky

Co-Founder & President, Gladbrook

Warren is a scientist, real estate broker, environmentalist, and co-founder of the Sklar Center for Restorative Medicine. After graduating from UC San Diego with a Master's degree in Biochemistry, Warren has had several successes in medical research, alternative medicine, real estate, and distressed asset fund ventures. Warren and co-founder Ryan Elmore's mission is to improve our world's health, well-being, and enjoyment by investing in the future of cannabis and plant medicines.

Book a complimentary Cannabis Investing Consultation with Warren.



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