The IRS guidelines spell out what you cannot invest in (IRS Pub 590). This is actually by design because the list of what you cannot invest in is much shorter than what you can invest in.

Following are some of investments that are prohibited with a self-directed IRA:

• collectibles (eg, coin collections);
• S-Corp capital stock; and
• insurance contracts.

The investment possibilities with a self-directed IRA are practically unlimited. Following is small listing of what you can invest in: all forms of residential and commercial real estate, mortgages, mutual funds, stocks, private placements, notes, tax liens, trust deeds and more.

Because there are such a broad range of investment vehicles, you can structure the diversity of your portfolio any way you like.