A person writing on the board with roi written in chalk.

Which Asset Class Provides the Best ROI?

If you’re planning to invest in your future financial security, you’re going to have to take some amount of risk. Investing is all about taking risks now for a potential gain in the future. In a traditional IRA account, investors minimize risk by letting a “trained professional†control their accounts. By choosing asset classes that are trending to make big gains, the account manager helps you choose your risks wisely. But does that “trained professional†really know what’s best for you?

What is ROI?

ROI, or Return on Investment, is the amount of money you earn when you liquidate your investment assets in the future. The most successful investments are those with a high ROI, because that means you’ve made a substantial gain compared to how much you risked in making the original investment.

How to Calculate ROI

If you purchase a fixer-upper piece of real estate for $100,000, invest an additional $50,000 into the property, and then sell it for $200,000, your ROI would be 33%. In other words, you earned 33% more than what you paid for the investment. The gain from making the investment in this example is $50,000. That’s a pretty comfortable profit.

Which Asset Class Provides the Best ROI?

One of the most common reasons our customers choose a self-directed IRA is because they want to be in control of the asset classes in which they invest. And while we’d all like to know which asset class provides the best ROI, individual investments can vary greatly in terms of ROI. Here are two popular investment options.

Real Estate Notes

Promissory notes and mortgage notes are documents familiar to those who are home buyers.  They are also investment options for Self-Directed IRA investors. They allow a non-bank investor to finance a note for a borrower. They are non-recourse loans, so the real estate behind the note is the security for the lender. Some investors prefer this type of investment over others because it is more passive to be the bank, than to be the remodeler or wholesaler of investment properties.

Real Estate

Real estate is a tried and true method of investing, but it’s really only good if (a) you have rehab experience or (b) you’re willing to wait. If you’re a rehab fanatic, then purchasing rundown properties in up-and-coming neighborhoods could be a great way for you to make your financial dreams come true. On the other hand, real estate is often a long game. You might have better luck purchasing an income property and renting it out for the next five or 10 years, then selling when you’re ready for a comfortable retirement.  Remember, with a Self-Directed IRA, the income generated from the rental can grow in the IRA either tax-deferred or tax-free.  Imagine taking out taxation…that certainly returns a higher ROI.

Learn More

When it comes down to it, there is no asset class that always yields higher ROI than others. Investing is about understanding the nuance of a particular industry and doing your best to take advantage of it. Whether you’re interested in world financial affairs or the local real estate market, the experts at iPlanGroup can help you decide if a Self-Directed IRA makes sense for your investments, while continuing to play to your strengths and make your financial dreams come true. Ready to get started? Schedule your FREE strategy session below.

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