Social Impact Investing with a Tax-Advantaged Plan

Today’s investors can not only invest in what they know but also in accordance with their conscience. Is there a company you’d like to support because of its positive impact on the community? What about an ETF that covers an industry you believe in? Thanks to self-directed investing, you’re not limited to publicly traded equities in this regard. You have the power to invest directly in the projects you think can make the world a better place.

Ready to open a new self-directed account? Click here to access our easy online new account application.

Small Businesses

Supporting small businesses has long been a vital component of local economies. However, it’s more necessary than ever due to COVID-19. It is no longer just a matter of David competing with Goliath; it is now David trying to survive while having to either radically alter operations or avoid shutdown altogether.

This dire situation affords investors the opportunity to extend lifelines to companies that would flourish under better circumstances. Through self-directed IRAs, Solo 401(k)s, or Health Savings Accounts, investors can issue private loans to help companies stay afloat by covering short-term expenses or by purchasing private equity in these businesses themselves.

Although the effects of COVID have slowly begun to subside, there is still plenty of need among the small businesses. You can help by giving these businesses your patronage, but you can also create a mutual benefit by investing.

Opportunity Zones

According to, the “opportunity zone” designation was created as part of the Tax Cuts & Jobs Act, a 2017 measure designed to encourage investments in “at-risk” communities. Upon nomination at the state level and certification by the Secretary of the U.S. Treasury, opportunity zones can accept investments from individuals and tax-advantaged plans. Qualified Opportunity Funds offer deferral of capital gains and tax-free returns on fund appreciation if held for 10 years or more.

Investing in these opportunity zones enables you to dabble in real estate, but not just any real estate. You can join a multi-million-dollar flow of new money into low-income, underserved neighborhoods and elevate communities in general.

Renewable Energy

As the United States moves away from fossil fuels, there are ample ways for your retirement investments to take advantage. You could buy stock in one company that produces solar panels, but that would be betting on one horse in a competitive race. By purchasing mining rights for the minerals used to build solar panels, your self-directed account can have a hand in the entire race.

You could also put your account to work in real estate by purchasing raw land and leasing it to a wind power company. Similar possibilities exist elsewhere in the realm of renewable energy, and increased enthusiasm for such energy could prove financially fruitful while taking our environment into consideration.

Believe in It and Invest in It

Some still don’t realize that a tax-advantaged plan can invest in alternative assets, let alone opportunity zones or solar power. In truth, the IRS explicitly disallows only three specific investments from IRAs, 401(k)s, or HSAs: collectibles, life insurance, and S-corporations.

Anything that doesn’t fall under those three categories is fair game. Please feel free to contact New Direction Trust Company if you’d like to discuss your investment options. You can call us directly at 877-742-1270 or send us a message via the Client Portal by logging in and clicking “Messages” near the top of the screen.

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