Investing in Plant-Based Industries with a Self Directed IRA

Plant-Based Investments

Plant-based foods are becoming more popular. I read Fiber Fueled, a book on health effects based on the foods we eat. In the book, a doctor referenced over 600 studies on the health implications of a plant-based diet. This article focuses on the growing popularity of plant-based productions. We also discuss how you can invest in the plant-based industry with a self directed IRA.

Why Is Plant-Based Food Gaining Traction?

Environmental Impacts

A growing concern for environmental impact has increased the popularity of plant-based foods. More people are talking about the planet and the effects of global warming. Animal sourced foods, such as beef or dairy milk, can use thousands of gallons of water to produce. Plant-based alternatives like tofu or oat milk average only a few hundred to produce. The massive amount of methane released by cattle has also been increasingly publicized.

Health Impacts

Plant-based food offers a multitude of health benefits. Plant-based foods of larger, lower-calorie portions can cause people to feel fuller, longer. This makes plant-based foods very helpful in weight loss diets. Plant-based alternatives can offer the same calories and nutrients more healthily.

How to Get Involved in Plant-Based Food Investments

Investors have the opportunity to enter this growing market of alternatives. Plant-based start-ups have become a hot choice. This is being recognized in many different industries and companies. For example, Purdue University is offering up to $100,000 in funding per semester. Funding goes towards innovations in the plant sciences industry, including new plant-based alternatives.

Plant-based investments are not limited to food. Many are shifting away from animal-based products toward alternatives with the same function. Below are a few animal products that are now facing plant-based competition:

  • cosmetic and hair care products
  • paintbrushes
  • leather
  • perfume
  • plastic bags
  • crayons

The more positively the product correlates to environmental or health benefits, the more sought after it is. Investors like that these products are affecting local, national, and global economies.

How Can I Invest in Plant-based Products With My IRA?

To invest in a start-up company with an IRA, you need to use a self directed IRA custodian, like Midland. A self directed IRA provides flexibility to invest in alternative assets. Alternatives can include small business stock or private placements. An SDIRA allows you to buy private assets, such as plant-based investments. The benefit of investing with your IRA is that all income and gains flow back to the IRA tax-deferred. If you are investing with a Roth IRA, income and gains are tax-free. With a taxable account, you would have to pay taxes annually on your investment.

Using Private Stock and Private Placement to Buy Alternative Assets

The two most common plant-based investments are direct stock offerings and private placements. If you are early enough in the company’s start-up, they may be offering shares of stock. In that case, once your IRA is set up and funded, the IRA custodian ensures the company stock issues to your IRA.

Stock Purchase Example

Cassie wants to use her IRA to invest in Horizon Burgers and Dogs. Horizon sells plant-based meat substitutes. They are doing a 5 million dollar capital raise to select family and friends. They are selling shares for $10 each. Cassie would like her IRA to invest $50,000 and buy 5,000 shares. The IRA custodian works with Cassie and Horizon to have the shares titled in the name of Cassie’s IRA. In the case of any dividends, the income would return to the IRA. If Horizon sells at $20 per share, all the original principal and capital of $100,000 would return to the IRA.

Private Placement/Direct Stock Offering Example

Dashawn would like to invest in a private placement called All Natural Shoe Company. They specialize in shoes made of organic cotton/wool and other pure products. All Natural is raising $20 million, and Dashawn would like to invest $250,000. Dashawn has been working with his independent advisor, who has recommended this product. Midland Trust is Dashawn’s custodian. Dashawn directs Midland to buy this asset in his IRA. His MIdland client service representative works with All Natural to prepare the documentation. Midland Trust signs on behalf of Dashawn for this investment. Then, Dashawn would approve all documents. Finally, Midland wires funds to the escrow agent to complete the transaction.

Typically, private placement investors have accredited status. This is due to the sophisticated nature of private placements. Learn more about accredited investor statuses. The most common accredited investor has a net worth of one million dollars or more. As with private stock, all dividends or gains from sales must come back to your Midland IRA.

Contact Midland to Learn More

There are many advantages to self directed IRAs. Feel free to contact Midland at 239-333-1032. Speak with one of our experienced representatives about your unique transaction today. At Midland, we are here to help.

Author: Alec Potts, Compliance Specialist at Midland IRA, Inc.

Midland Trust Company, nor its affiliates or subsidiaries (“Midland”), is not a fiduciary. Midland’s role as the Custodian is non-discretionary and/or administrative. The account holder or authorized representative must direct all investment transactions. The investor or authorized rep must choose the investment(s) for the account and conduct due diligence. Midland has no responsibility or involvement in selecting or evaluating any investment. Midland does not conduct due diligence on any investment. Nothing contained herein shall be construed as investment, legal, tax, or financial advice. Nothing contained herein shall be construed as a guarantee, endorsement, or certification of any investments.