Interest in true self-directed IRAs is increasing, and that naturally is increasing the number of scams based on self-directed IRAs.

A true self-directed IRA is one that essentially is allowed to invest in any asset allowed under the tax code. The tax code prohibits an IRA from owning only life insurance and collectibles.

Most IRAs, even those called self-directed by their custodians, aren’t true self-directed IRAs. Most IRA custodians limit IRA investments to publicly-traded stocks, bonds, mutual funds, and perhaps a few other investments. That’s enough of an investment universe for many investors.

But more and more investors want to own other investments in their IRAs, such as precious metals, real estate, mortgages, and small business interests.

Most IRA sponsors don’t allow these investments because they are more difficult to track, value, and account for. Their systems are structured to handle only publicly-traded securities.

There’s long been a small industry of reputable IRA custodians who offer true self-directed IRAs that can own most types of assets. These custodians, which often are trust companies, charge higher fees for transactions and other services than do custodians that allow only publicly-traded assets in IRAs.

Most traditional IRA custodians are part of brokerage or mutual fund firms. They are examined and regulated by federal or state securities regulators. But most custodians of true self-directed…

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