Investments: Time to put your IRA back to work - Consider real estate

Since the financial crash, investors across the board have been looking at their investment portfolios with a bent on increasing diversification, lowering risk, and normalizing their returns. For most investors this means re-balancing IRAs, or other retirement accounts, usually with a lower emphasis on equities. However, when most investors stay with current IRA custodians, they are limited to a "book" of available products, such as mutual funds and annuity products. While these products have a place in a well balanced portfolio, investors looking to truly diversify their retirement portfolio must look to alternative custodians within the alternative asset investment space. Generically, alternative assets have been described as anything that is not a bond, equity, or fixed income product, such as an annuity. These three asset classes, while they make up the majority of individual investor's allocations, only make up a part of the investment universe. Consideration could be given to the following: * Real estate * Timberland * Life insurance payouts * Private equity * Venture capital * Private placements For investors who are truly looking to diversify their investment accounts, they should not think that looking at different stock "sectors," all in the asset class of equities, will be giving them that needed diversification, it's important to seek those assets that are actually not correlated to the stock market. Exploring and educating oneself in available alternative asset classes is a good route to diversification. Many of the "alternative asset" classes are very complex and require much more time to completely understand and manage than is available to the average investor. However, for investors looking to place a piece of their investment nest egg into alternatives, real estate and real estate private placement funds are a viable option. Most people understand the basic concept of real estate investing: Purchase a property, collect income for a period of time, and eventually sell the asset (hopefully at a profit). For almost all types of real estate this is the basic model, though in practice, it can be much more difficult. This investing can range from buying a rental house down the street, to owning a strip center, or even an office building. The management on real estate can vary greatly, from almost none, in the case of triple-net (NNN) properties, where the tenant takes on the entire responsibility of taxes, insurance, and all maintenance, to rather extensive management in a multi-tenant office building or development project. Personal ownership responsibility can be further mitigated by investing in a real estate private placement fund or partnership, which handles all the day-to-day responsibilities, and still passes on beneficial returns and tax advantages of real estate to its investors. While real estate, like all other asset classes, is somewhat correlated to the economy at large, returns tend to be stable over holding periods and have much less volatility than stocks and bonds. Unfortunately, most traditional IRA custodians are not set-up for, nor will they allow, investments in alternative assets. Investors looking to make these types of investments must seek out a "Self-Directed IRA Custodian," who specifically allows and expects the investor to participate in the broad range of opportunities afforded to IRA investments. These custodians, like all IRA custodians, charge a variety of fees based on the investments, however, they allow the investor to purchase from a far broader range of investment opportunities. Once an individual creates an account with a self-directed IRA custodian, it is the individual who directs and authorizes the custodian with funding instructions into alternative vehicles. There is no reason to watch ones hard-earned IRA money languish in traditional bank savings accounts, money markets, and CDs when there are interesting and viable alternatives. It is just a matter of some exploring in arenas that may have peaked ones interest in the past or have been suggested or recommended by individuals in the know. In any case, it is time to put your IRA back to work! Marilyn Kane is president and Sean Shanahan is CFO at Iridium Capital, New York, N.Y.