True Self-Direction - Your Investment Decisions:
Banks and brokerage companies - the most common IRA account custodians - limit your choices to certificates of deposit, stocks, mutual funds, annuities, and similar financial instruments as it is in their own self interest to do so - they make their money from the sale of these investments and they generally only offer their own captive (commissionable) products to their Self-Directed IRA account holders.

Self-Directed IRA accounts are typically not limited to a select group of asset types (e.g., stocks, bonds, and mutual funds), and most truly self-directed IRA custodians will permit their clients to engage in investments in most, if not all, of the IRS permitted investment types (an almost unlimited array of possibilities including foreign real estate). Some of the additional investment options permitted under the regulations include, but are not limited to, life settlements, real estate, stocks, mortgages, franchises, partnerships, private equity and tax liens.

A true Self-Directed Individual Retirement Account is an IRA that requires the account owner to make investment decisions and investments on behalf of the retirement plan. IRS regulations require that either a qualified trustee, or custodian hold the IRA assets on behalf of the IRA owner. Generally the trustee/custodian will maintain the assets and all transaction and other records pertaining to them, file required IRS reports, issue client statements, assist in helping clients understand the rules and regulations pertaining to certain prohibited transactions, and perform other administrative duties on behalf of the Self-directed IRA owner for the life of the IRA account.

True Portfolio Diversification & Prohibited Transactions:
Self-directed IRAs, by allowing a wide range of investment choices, improve the account owner's opportunities to diversify their IRA portfolio(s). Life insurance, collectibles, or prohibited transactions with disqualified persons as defined by the Internal Revenue Service in IRC 4975(c)(1) , are not permitted in IRAs[1].  While a custodian's job is to follow the directions of the accountholder as a non-discretionary trustee, a custodian cannot ensure compliance or give legal or tax advice.
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