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Step Two: Perform Your Due Diligence
This is a critical step for any investment, but particularly for a self-directed investor. Due diligence is the process of investigating investment opportunities and gathering information to help make informed decisions.
Performing due diligence for each investment opportunity is best practice. It can help weed out unsound investments and prepare you for worst-case scenarios.
You should carefully examine the risk and return potential of your investment and make sure it fits as part of your comprehensive retirement plan. Research every aspect of the investment and make sure you feel comfortable with all parties involved and the terms and conditions of the deal.
You will need to verify that all IRS rules will be followed and the investment is not listed as a prohibited asset-type. You should also verify that the transaction itself will not be considered a prohibited transaction and will not involve a disqualified individual.
Before investing, you should consult trusted members of your financial team – such as your attorney, accountant, financial advisor and/or other financial professionals. This is important to remember because self-directed IRA custodians, like Equity Trust, are passive custodians and do not provide tax, legal, or investment advice.
Bonus Resources: For more information about self-directed IRA rules and regulations, due diligence, and more, visit the Resources page.