A solo 401k can make traditional investments, such as stocks, bonds, certificates of deposit and mutual funds. However, it also offers self-employed business owners the ability to invest in alternative assets like real estate. In addition, a solo plan allows for investment in almost any type of asset class without requiring the consent or approval of a custodian. The IRS only designates a few investment types that are prohibited.
The following are some examples of investments that a solo 401k is allowed to make:
- Real estate (including residential and commercial)
- Loan origination, including hard money loans
- Foreclosures, short sales, etc
- Real estate crowdfunding
- Most foreign currencies
- Secondary mortgage or mortgage pools
- Raw land
- Trust deeds
- Private operating businesses (be careful with UBTI)
- Tax liens
- LLC or other partnership interests
- Gold, silver or other precious metals (some restrictions apply)
- Private company C-Corp stock
- Stocks, mutual funds, bonds and other debt instruments
Unrelated Business Taxable Income (“UBTI”) should always be considered before making any investment.