There's an investment opportunity out there that many financial planners aren't talking about.
It's an opportunity that requires an open mind and a willingness to eschew the stock market in favor of consistency. It is life settlements.
Investing in life settlements isn't new. It's been around a while, but not all financial advisers understand it or want you to know about it because it involves purchasing life insurance policies rather than managing assets.
But don't let the fact that your financial advisor won't talk about life settlements keep you from exploring them as a smart investment opportunity. Instead, take a look at these five things your financial adviser doesn't want you to know about life settlements--and then decide for yourself:
1. Life Settlements Create Win-Win Opportunities
Life settlements are win-win opportunities because both the buyer and the seller come out on top.
If that sounds too good to be true, consider how life settlements work:
- A person who no longer needs or can afford their life insurance policy sells it for a price that is more than the policy's cash value.
- The seller receives cash and is no longer burdened by the monthly premiums.
- The buyer assumes responsibility for the monthly premiums for the life of the policy, but also receives the guarantee of the death benefit upon the policy's closure.
2. Life Settlements Provide True Portfolio Diversification
Diversify, diversify, diversify. This is the mantra of all smart investors. Sadly, too few truly have diverse portfolios. Adding life settlement investments to your portfolio adds a touch of diversification to your efforts to build a solid financial future.
They are considered long-term investments, which can provide you with some stability as you continue to invest in foreign and domestic stocks, real estate and other more volatile opportunities.
3. There is No Market Risk
If investors learned anything from the Great Recession, it's that anything is possible when it comes to the stock market--and the possibilities are both good and bad.
One of the nice things about life settlements is that the payouts are unaffected by the ups and downs of the stock market. They are not affected by global economics, politics or real estate markets.
When you invest in life settlements, you know exactly what to expect.
4. Tax Benefits
This one is short and sweet: taxes on life settlement investments are entirely deferred until the policy pays out. This can allow you greater financial flexibility both personally and professionally.
5) Your Success Doesn't Depend on Management Skills
This might be the biggest reason your financial adviser isn't talking to you about life settlements. Once you invest in life settlements, there aren't really any more decisions to be made, other than whether you want to expand your life settlement portfolio or sell to other buyers.
The only variable for which you have to account is time. And over time, life settlements have been shown to provide returns in the high single digits to the low double digits.
See for Yourself
Many financial advisers won't talk about life settlements. But there are those who truly look out for their clients' best interests--and they are the professionals who are willing to let you in on the secret.
These honest advisers are likely driving the movement toward life settlements, which saw a 32.6 percent increase in activity in 2015, according to survey results released by The Deal last year.
Now that you've seen for yourself the value of these opportunities, let's start a conversation about how to include life settlements in your portfolio.