Why you should start using your IRA funds to invest in promissory note

Having an IRA (Individual Retirement Account) is very important as it enables you save money for your future after retirement. The future can be so uncertain, it is therefore advisable to prepare well for it and be be in a position to withstand any risk which may come your way. One of the most common uncertainties in life is one's financial future, especially following retirement. You cannot be sure whether you will still have money for your daily upkeep, whether your company will compensate you, or whether your children or relatives will take care of you. It is thus in order that you take the situation in your own hands and save for your future.

IRA Investments

Most people tend to believe that IRA on its own is an investment and for that matter never attempt to further invest their IRA savings on other business ventures. Through the eyes of a financial expert however, IRA is not viewed as an investment. It is just viewed as a holding basket for one's money. The meaning to an investment to financial experts is to use your money doing something that will generate more money to you. When your money is just lying in the IRA account and just gathering a bit of interests and no significant returns, you are not considered to have invested. Financial experts therefore recommend that you invest your IRA funds on another business venture instead of just leaving them in your savings account.

There are a number of reasons which could be holding people back from investing their IRA money on other things. One of these reasons is that by making an investment elsewhere, you will be taking your money out of a tax exempted account and putting it in another place where you will be heavily tax.
The above reason however needs not hold you back if you understand how an IRA operates and the powers it wields.

An IRA has a legal right to own property or any other business investment. You will therefore be investing through the IRA itself and not taking money from it. You will still enjoy the tax benefits which any IRA enjoys.

Where can IRA funds be invested?

People who invest their IRA money elsewhere usually do so on various business ventures. These include real estate, private equity, stock market, bonds, mutual funds, promissory notes, oil and gas business, mining, and large scale farming among other investments.

Most of these projects are viable but if you were to make a better decision concerning investment of your IRA funds, you would invest them in promissory notes.

Why should you invest your IRA funds on promissory notes?

It is important to first understand what promissory notes are. A promissory note in simple terms is defined as a legal document in which one party promises to pay another party a specific amount of money on a particular date. This date could be a fixed date or when the party who is being paid demands it. The promissory note has to be signed for it to be acceptable.
A signed document promising to pay someone? You may be wondering why you should take out your hard-earned cash and put it on such a thing instead of safely storing it in an IRA, right? If yes then you should understand how a promissory note is used. A promissory note allows you to become a lender like banks and other financial institutions are. Promissory notes are debt instruments which allow individuals and companies to receive loans from sources other than banks or regular financial institutions. They contain information such as interest rate, date of repayment and consequences of loan default among others. Investing in promissory notes therefore means that you will be lending to others and they will be repaying you with interest. In most cases, you will be lending to high level private investors since this group makes up the highest number of people who use promissory notes.

There are a number of reasons why you should invest your IRA in promissory notes.

• To start with, income from promissory notes is predictable as opposed to other sources such as bonds and mutual funds. These two may go under leading to you losing your funds but in the case of a promissory note, you are guaranteed of payment unless the promisee defaults which is not very common.

• Secondly, owning promissory notes allows you to set particular terms such as the rate of interest and the date of repayment. You will therefore be able to earn the amount you desire from the promissory notes.
• Thirdly, promissory notes will guarantee you constant flow of money. You will be lending to various people with various repayment dates. This way, you will constantly be receiving money as the promisees repay you.
• Fourthly, promissory notes offer you a chance to make a long term investment. A promissory note can be used to give out loans which take as long as 15 or 20 or even more years. When you issue such kind of a promissory note, you will be raking in some income many years to come.

In addition, promissory notes can be used as money. You can be able to purchase another promissory note using one promissory note. You can also be able to purchase mortgages using a promissory note.

• Lastly, owning a promissory note allows to decide how you are going to use them. These include the people you lend to, the amount you lend, the interest you receive, and the date you are repaid. You will therefore be in complete control when you purchase promissory notes.

Self directed IRAs, Banks, and other financial institutions usually regulate the kind of investments that their customers can make with their IRA funds. Certain banks for example don't allow their customers to invest in real estate, private stock, bonds, mutual funds, and promissory notes. If your financial institution does not allow use of IRA to purchase promissory notes, you can convert your IRA into a self-directed IRA. With this, there will be little if any restrictions on what to do with your IRA funds. You as the owner of the self-directed IRA will be collecting the principal and the interests from the promissory notes or you may do that through a third party.