We Are to Help

free-services

Subscribe by Email

Your email:

Who We Are

Our Solutions


Not sure how to invest? Need advice? Fill out the form below, and we will personally contact you and review your investments with you.

How Fees Work

Contact Us

Would you like to be contacted by phone?


Key Investor Insight

Current Articles | RSS Feed RSS Feed

Retirees: Non-Traditional Investment Risks

  
  
  

Follow me on LinkedIn.

 

Volatile markets pose several challenges for retirees who rely on receiving a livable income stream from their investments. Interest rates are low and likely to stay low for the foreseeable future, making cash and high-quality bonds a safe parking place for now. Amid such a challenging environment, it's hard to blame retired investors for looking beyond traditional investments like stocks, bonds, and cash, or the mutual funds and exchange-traded funds that invest in these securities.

Many investors have flocked to gold and other precious metals, while others have gravitated toward investment types like life settlements, distressed real estate investments, and private mortgage investments. Such non-traditional investments might hold the promise of higher returns compared with traditional asset classes, but there is often a trade-off of higher risks and/or costs. Moreover, investors in non-traditional investments might not benefit from the same liquidity, transparency, and regulatory oversight that investors in traditional assets have. The following three asset types have picked up traction, but it is important to understand the risks before entrusting your hard-earned cash to them.

401k investment adviceLife Settlements: A life settlement originates when a life insurance policyholder, often an elderly or terminally ill person, sells his or her interest in the policy to a third party, usually at a level that is well below the policy's stated death benefit. The third party then resells, often by issuing securities, that interest to investors who in turn must keep the policy in effect by paying its premiums. When the originally insured person dies, the owner of the security collects the death benefit. The rate of return on a life-settlement investment will hinge on when the originally insured person dies. If death occurs within his or her estimated life expectancy, the return will be relatively high. But if the original policy owner lives well beyond the expected time frame, a life settlement can be a poor investment. Not only will it take a while to pay off, but the investor will have to fork over premiums on a regular basis.

Distressed Real Estate: Distressed properties typically sell at prices lower than what the owners paid and may be under foreclosure; their prices may also be low in absolute terms. As with investing in any other security type, seeking low valuations is a key way to bring down your risk, but distressed real estate investing is far from a low-risk endeavor. Distressed properties may require substantial additional investment before they can be rented or resold, and there is no guarantee that a seemingly low-priced property won't fall further still. Finally, real estate can be illiquid, and for smaller investors can be cost-prohibitive to build a diversified portfolio of properties.

Private Mortgages: The troubled housing market has given rise to another real estate-related investment, the private mortgage. In contrast to a loan extended by a bank or financial institution, a private mortgage is funded by individuals, groups of individuals, or a corporation that specializes in making such loans. A private mortgage holder may be able to earn a substantially higher interest rate than he or she can earn on cash or high-quality bond investment. At the same time, the risks of a private mortgage loan are also a lot higher than cash or bonds, even though the loan is secured by the property. Individuals usually turn to the private mortgage market because they can't secure bank financing; thus, they might have poor credit or limited down payments. Those risks can be exacerbated because it can be difficult to diversify in the private mortgage market.

Retirees should exercise caution when investing in non-traditional assets. It is important to understand that investors in these non-traditional assets might have to give up transparency, liquidity, and regulatory oversight.

Follow me on LinkedIn.


Comments

I would like to thank you for sharing your thoughts and time into the stuff you post!! Thumbs up! Hard Money School
Posted @ Wednesday, July 16, 2014 5:14 AM by CHRISTIANA
Post Comment
Name
 *
Email
 *
Website (optional)
Comment
 *

Allowed tags: <a> link, <b> bold, <i> italics

Privacy Policy

We recognize that our relationship with current and prospective clients is based on integrity and trust. Respect for our clients' privacy is highly valued at Key Investment Team, and your privacy is important to us. We work hard to maintain your privacy and we are very careful to preserve the private nature of our relationship with you, and we understand that the trust you have placed in us is conditional upon our proper and secure handling of your personal information.

Information Key Investment Team Receives

Key Investment Team may collect non-public personal information about you from the following sources:

  • Information we receive from you or your authorized representative on applications and other forms, in interviews, or by other means; and
  • Information about your transactions with us, our affiliates, or others.

Information Key Investment Team Shares

We do not rent, sell, trade or otherwise release or disclose any personal or financial information about you. We do not provide client information to persons or organizations outside of Key Investment Team who are doing business on their own behalf, for marketing purposes or otherwise.

We may disclose all of the information we collect, as described above, to agents, brokers and representatives who service you, and to companies as necessary to effect, administer, or process a transaction, or for maintaining or servicing your account, and as otherwise permitted by law.

Otherwise, we do not disclose any non-public personal information about our clients or former clients to anyone, unless authorized by the client or as required by federal or state law.

Information Access and Security

We restrict access to non-public personal information about you to those employees at Key Investment Team who need to know that information to provide the products or services to you. We maintain physical, administrative and technical procedural safeguards that comply with federal standards to guard your non-public personal information.

We require anyone to whom we disclose your personal information to protect its confidentiality and to use it solely for the purpose for which it is disclosed. We enter into contractual agreements with non-affiliated third parties that prohibit the third parties from disclosing or using your non-public information other than to carry out the purposes for which we disclosed the information.

Changes to Our Privacy Policy

Key Investment Team reserves the right to modify or remove parts of this privacy statement at any time. We will notify you in advance of any changes that may affect your rights under this policy statement. Should you have any questions regarding our privacy procedures, please feel free to contact Cay Boychenko at (818) 205-1013.


Subscribe by Email

Your email: