A Self-Directed Individual Retirement Account (SDIRA) allows the account holder to choose the methods of funding and assets for investment. Remarkably, the prefix, “self-directed,” comes into play as the account holder makes all the decisions by himself/herself.
An SDIRA, in comparison with a traditional IRA, allows the account holder to expand the investment options to a variety of assets, including startups, which the traditional IRAs do not allow.
To set-up and run an SDIRA, one needs to avail of the services of a self-directed IRA custodian that will maintain the account.
The custodian will not offer any advice related to investment, legality, etc. It will act as a passive entity by working on the instructions of the account holder.
Yet, you need to be careful in selecting the right custodian as that has a lot to do with the management of your account.
Before you finalize an IRA custodian, look at the following factors so that you can select the right entity:
Check out the investment options the custodian has on the offer. You should find out whether the custodian offers a diversified portfolio with a proper selection of assets so that you can avoid the risks as much as possible.
The custodians will charge you a fee to maintain your account. And the fee is a crucial decision in choosing a custodian for your IRA. You need to consider the essential factors, such as annual maintenance fees, loads, and trade commissions. Different custodians charge different fees. Usually, it is the maintenance fees that you can consider as a deal-breaker.