Good morning!

I currently am considering a self-directed IRA in order to make some investments in small companies/startups. The inspiration is Peter Thiel who did this to obtain $5B in his Roth (I realize his example is a bit unique). My IRA is a Roth at Fidelity currently and not quite as much as ole Peter's at the moment.

Have others done this, and what has your experience been like?

Apparently Fidelity doesn't allow true self-direction, but I'll probably keep a good portion of my IRA with them for the standard investments.

I would encourage you to take the plunge. I have been managing my own IRA's (traditional, Roth, Inherited) as well as my brokerage account for years. My returns have far exceeded the S&P 500 for a long time. For what it's worth, I buy good quality equities and hold them long term.

I looked into for some private investments but didn't due it because of the transaction fees (I think it was 1% of any transaction paid to the custodian) and I wasn't looking at investments with 10-100x return potential. If you have a long term investment with 10x+ return potential and you are ok with losing all of the Roth without a tax write off, I would find a good custodian and do it.

I moved one of my Roth IRAs from a mutual fund company into self directed Schwab Roth IRA.

Pretty easy setup.

What the OP is looking into is investing in startups and private companies. That can't be done with the Schwab type accounts. Those accounts are great for public equities and ETFs and for those that are comfortable doing their own investments, they are a great vehicle and easy to do.

I don't think there is any brokerage that will act as a custodian for private investments.

I think OP already owns a self directed IRA, he's asking about non-traditional investments. There are a few drawbacks to consider in doing non-traditional. Take real estate for example. You can buy a house within an IRA and rent it out, reinvesting the monthly payments. But you have to have a custodian to do so, that custodian has to be certified by the IRS to do IRA transactions, they do all of your reporting and there are rules regarding maintenance that are also non-traditional, like I believe if the air conditioner breaks you have to fix it with IRA money. I think. Plus it's very illiquid. If you need that money for any reason you have to sell the house. That's not a quick transaction. I would think investing in startups would also be an illiquid deal and hard to quantify the first few years. Plus for every great startup there's a hundred Fiskers.

In addition, there are very harsh penalties if you violate any of the multitude of rules that govern self-directed IRAs. For example, if you use your IRA to purchase an AirBnB, neither you nor any of your family members can ever stay at that AirBnB. And I do not remember the penalties off the top of my head, but I do know that they are incredibly harsh, possibly such as disallowing your entire IRA (forcing you to pay taxes on its entire value) together with interest and penalties.

I looked at these at one time and decided that the compliance rules were too strict and the penalties too harsh to make them worthwhile.

Wrong thread

I set one up w Equity Trust and have invested in 4 multi family deals. It has been a little challenging working w them but I have managed to get them done. Feel free to PM me if you want to visit about it.