David Coe on Capitalizing on New Opportunities During the Current Recession

Let's assume people have some money left after the carnage in their 401k's and/or IRA's. What would be a smart strategy for them to protect that money and build it back up again?

DC: It's very easy to get caught up in the hysteria of what's happening each day to the stock market, our banking industry and key economic indicators. But don't get so overwhelmed that you miss the opportunities around you.

People are having a hard time borrowing money these days. Why not use your retirement account to make trust deed loans? Investors are using their IRA, 401(k) and pension plans right now to make loans to other investors, secured by real estate, that are producing double digit returns.

People are having a hard time paying their property taxes. Why not use your retirement account to purchase tax liens? Investors are using their accounts to purchase tax liens at public auctions and again are making double digit returns on their retirement savings.

Are these types of investments guaranteed to produce returns? No ... no investment ever is. But the current market IS providing opportunity if you're willing to look beyond the headlines and the norm.

And why did so many suffer so much carnage in the last year? The simple answer is a lack of true portfolio diversification. Is the stock market going to come back? Yes, it probably will. But when? Waiting for Wall Street to rescue you from the mess it created is like trying to lose weight by switching from Quarter Pounders to Big Macs. You need to alter your behavior and build a stronger portfolio today, not once the market comes back.

Don't cash out of everything, but other investment classes are offering opportunity right now while the market continues to seesaw. There are plenty of self-directed custodians out there that offer a range of investment accounts that will allow you to take full advantage of ALL investments that are possible by the letter of the law. So don't limit your personal recovery plan to the investments offered by your current retirement plan. There are options out there; it's up to you to find them.


What are the risks or downsides to having a self-directed retirement plan? Do you need a lawyer to set one up or have to pay a lot of money?

DC: One of the biggest concerns about having a self-directed retirement plan is the custodial fees. But compared to owning mutual funds, they're usually less. Self-directed IRA custodians get paid based on the size of your account, usually 40 basis points or less. So if you have a $100,000 account, your annual fee is in the $450 range. Other banks and brokerage houses don't charge you a fee because they make their money from the limited investment products they offer.

Mutual fund fees can include management fees, redemption fees, exchange fees, account fees, purchase fees, distribution fees and operating expenses to name a few. Usually these fees are TWICE as much as what a self-directed custodian will charge. You just don't see them since they're buried in the investment costs.

Setting up a standard self-directed plan is easy and free. The custodians are very good about helping you fill out the necessary paperwork and facilitating the transfer of funds. If you're looking for help on what type of account to open, talk to your CPA or tax professional. And once
you're ready to invest, work with someone who specializes in the asset class you're interested in. If you want to diversify with real estate, work with a realtor who specializes in real estate investing.


Are there any other suggestions you'd like to make about surviving financially during these tough times?

DC: Most individuals have a very passive attitude about their retirement account. They've historically trusted their "diversified" stock market portfolios to provide for them and are now too overwhelmed with everyday responsibilities to find a way to navigate the current storm. We're all busy, but your retirement is your responsibility alone, so take control of it.

You need to develop your own personal recovery plan that unfortunately will not involve any federal bailout money. If you don't have the desire or inclination to develop one on your own, there are professionals out there to help. Find a "fee based" certified financial planner or CPA who isn't beholden to a singular financial institution and let them design a diversified portfolio
for you to help survive ... and maybe even thrive ... in this market.

If you want to invest in real estate, find a good realtor to help guide your investments. A realtor for someone looking to invest or buy real estate is the best deal you'll ever find. They spend a huge amount of time recommending and analyzing investment opportunities without taking a dime since they get paid by the sellers.

Are you optimistic or pessimistic about the economic direction of this country ... both in what the federal government is doing and what's happening in the private sector?

DC: I'm cautiously optimistic about our current direction. This economic disaster had three main
causes: unrealistic/predatory lending practices unnaturally driving up home values, financial institutions left to run amok gambling with people's savings and an unsustainable amount of spending based on future earnings (borrowing) instead of past earnings (saving).

I believe like the economy as a whole had a (needed) kneejerk reaction to all three ... creating a pendulum swing that went the complete opposite direction: lending to small business and individuals evaporated, financial institutions have received huge amounts of federal interaction via cash infusions and consumers stopped spending due to fear of or actual
unemployment.

But signs are starting to emerge that we're starting to drift back to the middle and hopefully the worst is behind us. Will we still have bad news? Absolutely. But hopefully it will be tempered with positive steps such as the ones we're starting to see in the real estate sector. Whether or not you support their decisions and programs, the new administration appears to be organized and
active in helping to find solid ground for our future economic growth. Let's hope more of their ideas have the intended effect than not. But these are unprecedented times and who knows what still lurks around the next corner.

Freedom Growth is a company that helps small business owners and individuals self-direct
their retirement plans and invest in alternative assets such as real estate.