The Senior Life Settlement Asset Class is an alternative investment to grow and protect your money. There is one factor that makes life settlements an altogether different type of investment than stocks, bonds, real estate, precious metals, currencies, and all of the other buckets of money in your asset allocation. The difference is mechanical.
A life settlement earns an absolute return because its payout is created by the maturity of a legally binding life insurance contract. The policy’s valuation is not subjective. It’s not up for debate or interpretation. The face amount of the policy is printed right on the contract. It can only turn out one way.
Everything else in which you can invest your hard-earned capital is prejudiciously influenced by more than one risk factor. Economics, regulation, speculation, research opinion, manager performance, historical track record, and in some cases, which way the wind is blowing have some material influence on price and value in cyclical, volatile asset classes. A life settlement investment is a Time-to-Maturity play, period. Buy it, hold it, wait, grow and protect your money. To date, time is the only foe humanity faces that remain undefeated.
The difference is mechanical
You buy a life settlement at a discount to the face amount. That’s the Spread or Yield-to-Maturity (YTM) and you know what that is upfront on the day you buy it. There are no moving parts. It is a passive investment that avoids market volatility and geopolitical risks because it’s a performance contract triggered by an unavoidable eventuality.
Life settlements play an important role to mitigate risk in your asset allocation. Insurance, in all of its forms, is designed to replace what’s been lost. All of the other buckets you invest money in, can and do fall in and out of favor. Life settlements mitigate capital losses and grow money in a predictable way.
It’s a performance contract triggered by an unavoidable eventuality
Not to pick on one asset class, but for instance, real estate investors were geniuses in 2006. The same bunch was bankrupt in 2008. Time heals all wounds, but it also wounds all heals. The cyclicality and volatility of investing are both the good and the bad parts of growing and keeping your wealth. Timing and time-in markets play their parts with equal weight across all asset classes. It’s just smart business to add a stop-loss component to protecting your money where inherent and unavoidable risks are bound to show up from time to time.