“There are two times in a man’s life when he should not speculate: when he can’t afford it, and when he can.” ~Mark Twain.
The word “investments” has become almost synonymous with stocks, bonds, and mutual funds, to the point that a “diversified portfolio” is a misleading term. To some investors, the term “diversified may imply that they should have stocks and bonds and mutual funds… or small and large cap stocks… or perhaps, stocks from tech, financial, healthcare and international business.
What’s the problem with that? As mentioned in the last post, the stock market a form of gambling. If all or most of your money is in the stock market, you’re at a LOT of risk. You’ve got no control and no guarantee of what the market will do. And even if you DO manage to invest in rising markets, chances are, the fees you’re paying will have a much larger impact than you realize.
Perhaps you’re wondering, “What’s left if I remove the stock market from my investment options?” For the uninitiated, it’s a bit like figuring out what’s left to eat on a wheat-free vegan diet. But there ARE alternative options… great options! Here are some of our alternative investment favorites at Partners for Prosperity, Inc.:
1. Bridge Loans.
A Bridge Loan is a short-term loan to a buyer who is typically in the process of both selling and purchasing or developing real estate. A Bridge Loan is secured by property that is in the process of being sold, in much the same way a pending tax refund is used as collateral that allows a tax-payer to pay a fee to a third party and receive their refund early.
The Bridge Loan allows someone selling (or simultaneously buying and selling real estate) to receive their funds early, while allowing the investors to easily participate in tangible, controlled real estate project. Bridge Loans have in the past returned profits consistently in the low to mid-teens, annualized – with no management fees. These are short-term investments, typically the money is repaid (with interest) in six months.
Best yet, unlike the investments that caused the stocks and even whole companies to crash down in 2008 in the mortgage meltdown, Bridge Loan borrowers are individually assessed and qualified. These are not loans that have been sold, re-sold, converted into stocks other investment instruments, and then packaged in bulk to hide deficiencies. These are simple, direct, secured loans that have been individually evaluated to protect both the investor and the integrity and reputation of the company we work with.
Bridge Loans have been offered by mortgage brokerages and even banks for years, but now it is easier than ever for individuals to invest in Bridge Loans, “be the bank”, and enjoy the benefits of helping qualified borrowers.
2. Life Settlements.
Most investors have never heard of Life Settlements, but they are quickly gaining popularity and favor with advisors and investors alike. Life Settlements, or Senior Life Settlements, as they are sometimes called, have created a multi-billion dollar secondary market for life insurance policies as well as a new asset class for retail investors. A recent study shows that Life Settlement transactions are expected to exceed 21 billion dollars by 2012!
If you’re wondering what a Life Settlement IS, a Life Settlement is simply the sale of an unwanted or unneeded life insurance policy by a senior citizen to a third party, typically a licensed Life-Settlement Provider. A licensed Life-Settlement Provider is a company that allows an investor to purchase a fractional interest in the eventual death benefit payout of an existing life insurance policy.
Life insurance policies may become unwanted or unneeded for many reasons. The beneficiary may have passed away. The premiums may no longer be affordable, or the policy holder may wish to use the money differently, perhaps for long-term care or medical needs. The policy holder may have multiple policies and no longer feel they have need of them all, or the policy may insure a “key man” in a business partnership who has retired.
Previously, Life Settlements were only able to be utilized by institutional investors such as banks, hedge funds, and other insurance companies. Analysis of performance of Life Settlements has demonstrated annualized gains ranging from high single digits to mid-teens or more, typically in ten years or less.
3. Life Insurance.
Life insurance isn’t so much a traditional “investment” as a place to store money and a tool that can give you multiple benefits. With the proper policy and the right strategy, a life insurance policy is like a “souped-up savings account.”
Some of the advantages of using life insurance in your overall investment strategy include:
- Tax benefits. A “whole life” or insurance policy can allow investments to grow in a favorable tax environment.
- Flexibility and control of your money. The cash value of a life insurance policy can literally allow you to “be your own banker.” When needs, emergencies or even great opportunities arise, you have access the money you need.
- Having this flexibility allows you to consider and measure opportunity costs, thus creating benefits elsewhere in your personal economy.
- Increased flow and usage of money. Life insurance allows one dollar to do the job of many, which is consistent with our 7 Principles of Prosperity. For instance, your premium payments create your death benefit and a tax-free gift to heirs while building up cash value that can be borrowed or borrowed against.
- A guaranteed benefit. Whole life insurance is “permanent”, which means you can never lose your insurance due to a health crisis. And… you can even sell your policy if you wish to use some of your death benefit while you are alive!
Are You Ready to Invest “Outside of the Box”?
While many investors have succeeded by investing only in better-known vehicles such as stocks, bonds, and mutual funds, the market crash of 2008 and the instability and volatility of 2009 demonstrated that just because “everybody’s doing it” doesn’t mean it’s a good idea.
Bridge Loans, Life Settlements and Life Insurance can be safe, reliable, superior choices because these alternative investment options-
- Are not subject to the whims of the stock market
- Offer true portfolio diversification for the investor
- Are not affected by global economic and political events
- Offer excellent proven and predictable rates of return.
Stay tuned for more detailed information about these alternative investments in future posts!
Could your investing and financial management strategies use an upgrade? Take our Prosperity Pitfalls Quiz and see where you stand!