The everyday investor becomes familiarized with stocks, bonds, and mutual fund investing through the individual retirement accounts (IRAs) that are setup through their employer. As the years go by, this retirement nest egg begins to grow, and investors become more proficient in managing their investment portfolios. Most financial institutions where an investors’ IRA portfolio is held, limits them to investing in traditional stocks, bonds and mutual fund investments. As a result of this, investors start researching other ways to invest in their retirement portfolios, realizing the value of diversification. This research may lead an investor in the direction of managed futures, but the lack of knowledge on how to invest in managed futures through an IRA can turn an investor away.
Contrary to common belief, investing in managed futures and CTA strategies through an IRA account is actually quite simple. Since most financial institutions will not allow you to invest in futures strategies, the first step is to “roll over” some of the funds in your IRA account into a “self-directed” IRA account, held by a custodian who accepts futures accounts (a couple of the custodians we work with are mentioned at the end of this article). A self-directed IRA account is no different than a regular IRA account; the only difference is that you, the investor, is “directing” the placement of your funds. “Self directed” IRAs allow you to invest in managed futures, while still maintaining tax deferred growth because the assets are contained in an IRA.
Despite how daunting it may sound, rolling over (aka transferring funds) some of your funds from your existing IRA account simply requires the completion of a few forms. Once these forms have been completed, your custodian that will manage your futures investments will take care of the entire roll over process. The neat thing about opening a self directed IRA, is that you get to decide how much of your IRA funds you would like to move from your current financial institution. We recommend starting with an amount you feel comfortable with and leaving the balance with your existing institution. As you get more familiar with managed futures investing, you are free to transfer (or “roll over”) more funds as you please.
The team at aiSource is very familiar with the self-directed IRA procedure, and can help through the entire process. A couple of the custodians that we recommend for housing your self-directed IRA are:
Midland IRA
Millennium Trust Company