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Self-Directed IRA Trends and Outlook

Investors are catching their collective breath after an incredibly challenging and unprecedented year. We witnessed the onset of a global pandemic that claimed hundreds of thousands of lives, social unrest spread across the country and a tumultuous presidential election transpired, all within the span of roughly 10 months. These factors disrupted global economies and sent markets into a tailspin, and even the savviest investors found themselves at odds with the markets at certain points.

2020 Top Investment Trends

As the year unfolded, several of these major drivers prompted investors to begin exploring self-directed IRAs (SDIRAs) for their investment strategy and we saw four key investment trends emerge that we believe will support this interest in years to come.

Take a look at STRATA’s Year in Review & Outlook for the Future video for a brief overview of this article: 


Trend #1: Changes from the SECURE Act

The first trend surfaced at the beginning of 2020 when the SECURE Act was signed into law, bringing about new benefits for retirement savers. For example, the legislation gave people more time to save by eliminating the age limit that prevented individuals from contributing to their IRA after they turned 70½ years old. Savers were also given the opportunity to stay invested longer due to an increase in the age at which individuals have to begin taking Required Minimum Distributions (RMDs). The SECURE Act also opened employer-sponsored plans to non-contract workers, broadening access to retirement plans overall. In addition, it provided advantages for small business owners by granting them certain incentives. These benefits yielded a fresh perspective on retirement planning and gave investors a new opportunity to consider SDIRAs.

Trend #2: Ongoing market volatility

As we mentioned, the market’s major swings last year would have rattled any investor. From the historic crash on March 9, 2020, when the Dow Jones Industrial Average plunged more than 2,000 points, to the surprising highs with the S&P 500 climbing nearly 65% from its March low to close off the year strong. While the markets showed remarkable resilience amid the ongoing pandemic, the volatility led many investors to diversify their assets away from traditional stocks and bonds and turn to strategies like alternative investments, accessed through SDIRAs.

Trend #3. The rise in ESG investing

Third, we witnessed environmental, social, and corporate governance (ESG) become a major investing trend and headline driver. According to the Forum for Sustainable and Responsible Investment’s 2020 trends report, ESG assets in 2020 accounted for 33% of total U.S. assets under management, and between 2018 and 2020, U.S.-domiciled sustainably invested assets under management grew by 42% to $17.1 trillion. This trend was fueled by some of the major events and social movements that occurred in 2020, inspiring investors to take action through their investment decisions by investing in companies and causes they truly believed in. Investing through an SDIRA gives individuals a vehicle to make this a reality, allowing them to access more tangible investments that they couldn’t invest in otherwise.

Trend #4: Emergence of DIY investors

The final trend of 2020 revealed that many investors were simply not willing to take a backseat on their investment decisions. Many savvy investors looked beyond a cookie-cutter approach to investing by picking and choosing where to invest their hard-earned money. SDIRAs are an option for investors looking to utilize their retirement savings to take control over their investment decisions. Individuals can invest in things like real estate, private equity, crowdfunding, and more, all through an SDIRA.

Outlook for the future

Fortunately, with the New Year comes a fresh outlook on the future and what we can expect to emerge in the alternative asset space. In the next five years, we believe alternative investments will continue to dominate the news cycle as investors strive to take advantage of their benefits.

Preqin is a leading authority in alternative investments, and they offered their outlook for the next five years:
● Alternative assets under management are projected to grow in North America by 30% by the year 2025.
● Global private debt assets are expected to grow significantly, with a compound annual growth rate of 11.4%.
● Private equity assets could surpass $9 trillion by 2025.

Despite a turbulent year in 2020, the outlook for alternative assets is bright for 2021 and beyond. Interested in learning more about the world of alternative investments and how they fit into your investment strategy?

When choosing a custodian for your self-directed IRA, it’s the details that matter. STRATA Trust has over 350 years of combined experience in the self-directed IRA industry and built our reputation by delivering simple and straightforward custody for a broad range of investment options. Discover how alternative investments can add value to your investment strategy.