Life Settlement Investments - How To Invest
Life settlement investments are a unique brand of alternative asset class that delivers high yield with no correlation to the returns of equities, bonds, real estate or any other conventional asset class. The returns rely solely on the following factors:
Quality of the Policies - When looking back at some problems cited in historical life settlement investment opportunities, some complaints arouse surrounding the quality of the policies themselves. Perhaps the information gleamed from the policy-holders was inaccurate, or the fee captured across multiple transitory bodies usurped a substantial portion of the gains to be had. In the end, if an investor was expecting an 8% annualized return and they achieved 2%, there's something to be said for the initial policy quality and fees.
Diversity of Policies - An obvious tenant of all investing classes is diversification. While a single policy may pay out at $1 Million or more, it's advantageous to invest with a fund of policies where risk and volatility is spread across many policies. There are historical examples where the policyholders themselves outlived the investors!
Actuarial Accuracy - Aside from misinformation being given by the policyholder who may be looking to boost their cash payout upon sale, if the actuarial assumptions are incorrect to begin with, returns may end up much lower than promised. For instance, if a 60 year old life-long smoker has a particular life expectancy but the actuarial assumptions are dramatically off, returns may be substantially lower due to initial rosy forecasts of payouts.
Beware Fraud - One of the biggest deterrents to life settlement investments continues to be the fear of fraud. There are numerous reports of investment advisors and insurance agents that committed fraud through various Ponzi schemes whereby they continued to pay old investors with incoming funds from new investors. Like all schemes, they eventually collapsed and made headlines. So, it's important to find a legitimate, trusted financial outlet to invest.
How to Invest in Life Settlements
It may be surprising to learn that you DON'T actually have to be an accredited investor to invest in life settlements. Typically, alternative investments such as this are usually limited solely to "sophisticated investors", which would entail a $2 Million net worth and $200,000 annual income. However, many advisors and funds allow a certain portion of their participants to invest with no restrictions.
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