Investing in Private Equity with Your Retirement Plan

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Countless strong, innovative companies lie below the public radar, and many can be accessible investments through your self-directed IRA, 401(k), or Health Savings Account. By investing in privately held companies, your tax-advantaged plan can benefit from diversification and enhanced returns as part of a balanced portfolio.

 

Ready to learn more about private equity? Click here to download our Private Equity Investing Guide.

 

Let’s take a look at three ways your account can invest in private equity:

Private Stock

Just like their public counterparts, private companies issue shares to raise money and continue growing their business. In fact, most of the large, public companies with now-recognizable names, like Apple, Facebook, and Amazon, grew through private capital raises.

When you find a private business you’d like to invest in, your self-directed account can obtain stock certificates, complete a subscription agreement, or engage in another approach offered by the private company. Also called private equity investing, investing in private companies with your self-directed plan is, in many cases, simply a matter of appropriate paperwork.

Pre-IPO

Some of the hottest companies in the investment space today wait just below the surface of Wall Street and are on the verge of a public listing. Your self-directed account can invest in pre-initial public offering (pre-IPO) companies through online marketplaces. Some such marketplaces may only accept accredited investors, but thanks to a December 2020 decision by the SEC, just about anyone can become an accredited investor. If you’re an accredited investor, your self-directed account is equally accredited.

In many cases, shares debut on public markets at far higher prices than private investors paid, but lock-up periods may apply (i.e., shareholders may have to wait a certain length of time after an IPO before they’re able to sell). As with any self-directed endeavor, due diligence can help you determine whether a pre-IPO investment is appropriate.

Crowdfunding

Similar to pre-IPO marketplaces, equity crowdfunding platforms allow investors to join others in purchasing a percentage of a business. Rather than buying shares directly, you can allocate a sum of money toward a company and enjoy returns in accordance with the percentage that was purchased. The investors benefit proportionally as the company grows.

How to Make a Private Equity Investment with NDTCO

Once you’ve identified a suitable private equity opportunity, the process is straightforward:

  • Log in to your client portal at portal.ndtco.com.
  • Click Invest on the left side of the screen.
  • Click the Private Equity drop-down menu and click Invest Now. You will be re-directed to our Private Equity Buy Direction Letter via DocuSign, which you can complete and submit entirely online.
  • To submit supporting documentation, such as a subscription agreement, through your client portal:
    • Scan the documentation to your computer.
    • Click Messages in the upper right-hand corner of the screen.
    • Compose your message and click Choose File(s) to attach the scanned paperwork to your message.
    • Click Submit to send your secure message directly to our staff.
  • Important things to remember with your documentation:
    • Your account is the “investor,” and its name, not yours, must be on the document.
    • Your account’s name is NDTCO as custodian FBO [Your Name][Your Account Type].
    • Because you are not the investor, you cannot sign any signature lines. Instead, you must sign as “Read and Approved” in the margins of any applicable pages and leave the signature lines for an authorized NDTCO signer to complete.

Don’t Hesitate to Reach Out

Ready to learn more about how to invest in private equity? Click here to register for our Private Equity with Your IRA webinar on Tuesday, January 19 at noon, Mountain Time.

You can also contact our staff at 877-742-1270 or by submitting a message through your client portal at portal.ndtco.com.