Invest a Self-Directed Solo 401k in Real Estate Funds (REITs)

In addition to having option to invest a solo 401k in physical real estate such as rental properties, raw land, commercial real estate and foreign real estate, for example, a solo 401k may also be invested in real estate funds that invest primarily in real estate investment trusts (REITs), which are publicly traded securities representing ownership interests in real estate. Some REITs spread their holdings across a variety of properties—apartment buildings, offices, and so forth. Others concentrate in a single real estate category. Some REITs also invest in foreign real estate ventures.

Despite their recent volatility stemming from the real estate melt down of 2008, real estate offerings can enhance portfolio diversification because of their low correlation with other asset classes such as stocks. Historically, real estate investments have also been an effective hedge against inflation. That attribute, however, can vary greatly depending on an investor’s investment window. For example, if nearing retirement and; therefore, the need for a steady income stream, investing a solo 401k plan in real estate may not always be an effective hedge. In sum diversification is the name of the game; therefore, don’t put all your eggs in one basket.