For most investors, IRA investments are generally limited to stocks, bonds and mutual funds because most investors are not aware of the many different kinds of investments which can be made through an IRA. A vast majority of financial institutions which offer IRAs, typically limit investment options to stocks, bonds, and mutual funds.
Contrary to most typical IRAs, there are certain trust custodians who accept futures accounts. Such IRA’s are often referred to as “self directed” IRAs. When an investor rolls his assets into a self directed IRA, the assets can continue to grow tax deferred.
“Self directed” IRAs allow a broker the ability to attract new customers who have risk capital available in an IRA to invest in managed futures.
Before placing IRA funds into a futures account, funds from an IRA must be invested through a “self directed” IRA because an investor could suffer tax consequences if he transferred money from an IRA directly into a futures, options, or foreign exchange (forex) account. In order to avoid such tax consequences, the investor can trade futures, options and forex through a self directed IRA that is held at a trust company.
“Self directed” IRAs allow an investor to invest in managed futures, while still maintaining tax deferred growth because the assets are contained in an IRA. The term “self directed” indicates that the IRA custodian is allowing the IRA owner, control over his own investment decisions. When an IRA is self directed, the IRA owner makes all investment decisions and instructs the custodian to act. The IRA owner can instruct the IRA custodian to invest in managed futures through a particular CTA. Please keep in mind, that any capital invested in futures, even though in an IRA, is required to be risk capital.
There are several trust companies or trust custodians that offer self directed IRA’s that can utilize the futures and options markets. If the customer does not already have a self directed IRA that accepts futures trading, the customer will have to open a self directed IRA through a trust custodian, and then open a futures account under the trust custodian’s name. Please be careful not to choose the trust custodian for your customer. You can make available, a list of at least three trust custodians that the customer can use, or he can use a different trust custodian that accepts futures accounts.
To receive more information on investing in managed futures through an IRA, please call VIP Futures at: 1-800-516-1663
