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Structured Settlements Offer Minimal Risk & High Rate of Return

So, What’s the Catch? (Part 4)

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If the secondary market for structured settlements offers a much better return than your bank and the investment is backed by major insurance companies and possibly the state where it originated, is there a catch? With the amount of money you are thinking of investing, we are sure that you are going to research this issue and read some favorable articles and some articles with warnings against this kind of investment. As for the warnings, we are so sure that these are great investments for savvy investors we’ll tell you what they are going to “warn” you about: liquidity.
There, we said it. You can go to any website on the subject and, among the praise for these excellent investments, will be the only issue mentioned: liquidity. If you want, you can still do your research, but here is what they are going to tell you. When you invest in a structured settlement, you are basically buying the investment. You receive your excellent investment return, but paid out on a predetermined schedule. Your investment is not liquid and for that reason may not be a good fit for short term investments. You can see the timeline of payouts before purchasing these investments, so we aren’t sure why these articles are warning about this (maybe they are affiliated with banks that would prefer paying 80% less or other inferior investments). We’re sure that a short term liquid investment is not why you are reading about structured settlements anyway. You want a great return on your money. The money is sitting in the bank and it isn’t working for you. You want a great return on your money with low risk – safe money. The excellent investment rate and little to no risk makes this a great product for the money that is sitting in a low interest rate account doing nothing for you.

The very lack of liquidity they warn you about allows you to get the great investment rate being offered. If you put money in a savings account or a CD, you can take the money out (with a penalty for the CD) any time you wish. With a structured settlement, you get checks on a time schedule, but can’t just “take your money out.” The bank savings account and CDs have a horribly low rate typically below 1.75%. Your structured settlement has a rate that could be as high as 7.0% and is typically in the 5.0% range. You know ahead of time how much money you are getting and when and there is an insurance company making sure you get it. No surprises here.
But it is not as if you cannot sell your structured settlement in the same way you bought it. Because you purchased it at such a low price (high interest rate) the likelihood is that you could sell it back to the very same people that sold it to you for roughly the same price as you bought it.
Simply put, making an investment in a structured settlement a part of your portfolio allows you to safely earn a 4-10x higher yield then you can get from your bank with little to no risk. Take the time to do your research, or you invest your money now and start earning an excellent return now.
Category: Financial Planning

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