SELF-DIRECTED IRA FAQ
From a legal standpoint, a self-directed Individual Retirement Account (IRA) is not different from any other IRA. The term "self-directed" simply indicates that you choose your IRA's investments and that you don't limit yourself to the packaged products available at traditional IRA custodians. Most brokerage houses and banks tend to offer self-directed IRAs that are within their own product/service portfolio, so you are somewhat limited if you do business with a specific bank or brokerage company.
The rules governing products in which an IRA can be invested in are exclusive—not inclusive. In other words, the rules only specify products in which you cannot invest. Therefore, there is a virtually unlimited array of possible investments that fall well within the permissible boundaries. The Internal Revenue Service only defines the following assets as excluded (prohibited):
- Life insurance products (for example, a life insurance policy in the name of the IRA owner),
- Collectibles (for example, antique rugs, cars, stamps, furniture, etc.), and
- Capital stock in an "S" corporation.