The Motley Fool: End-of-Sale Insurance Policy

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ASK THE CRAZY

Profit to death

Question: Is viaticum settlement a good way to earn money?

A: A viaticum settlement is when an investor purchases a life insurance policy from a terminally ill person.

If someone is only going to live three more years and needs the money to pay their medical bills or whatever, they can sell their life insurance policy. If he has to pay $ 100,000 on his death, the buyer could pay, say, $ 66,000 for it. It sounds like a win-win plan, as the seller receives a large lump sum during their lifetime and the buyer can expect to receive $ 100,000 in about three years, or an annual return of about 15%.

But it is not that simple. There are usually costs involved, and the sick person can live for many years, reducing the final return on the investment. A cure or a new treatment might even make it outlive the buyer. (Note also that there are “living facilities,” geared towards older people and those who are not terminally ill.)

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There have been many instances of fraud with these regulations, but they have become more regulated and are legal in most states. They can be a win-win, offering money to both parties, but they can be risky and can also cause a bit of discomfort as investors await death. Learn more about them at sec.gov/answers/viaticalsettle.htm and on the industry websites viatical.org and lisa.org.

Question: Is it too late to refinance my mortgage?

A: The rates have increased in recent years, but they are still quite low. Depending on the interest rate on your current mortgage and other factors, such as how long you plan to stay in the home, refinancing may still be a good idea for you. Learn more at bankrate.com.

MY DIDEST MISTAKE

2000 boom and bust

Dear fool: My dumbest investment was buying shares of JDS Uniphase near the top of the 2000 tech bubble in the stock market. ‘Nuff said.

How did it happen? Well I was stupid (with a little f) and thought the 2000 boom would last forever. All I could see was clear skies as far as the eye could see.

The madman replies: Prior to the bursting of the internet market bubble, optical networking specialist JDS Uniphase was one of the biggest players, surpassing $ 1,100 a share at one point in time and posting a market value of around $ 125 billion. Then it fell hard, dropping over 99% and hitting around $ 2 a share in 2008.

The business recovered after that and underwent some changes.

In 2015, it split into two companies: Lumentum, specializing in optical communications and commercial lasers, and Viavi Solutions, specializing in networking products and services, among others. The two companies are still there, with recent market values ​​of $ 2.9 billion and $ 2.3 billion, respectively.

The bursting of the tech bubble has taught many new investors the danger of getting into booming stocks just because they take off, regardless of their valuations. Many were so overrated that they were in danger of sinking, but it can be difficult for our brains to recognize it and act on it. Remember, the best investment opportunities are usually found in large companies whose stocks have temporarily plunged.

THE CRAZY TAKEN

Easy real estate income

Realty Investment Trust (REIT) Realty Income (NYSE: O) is a company that Aesop’s Turtle would be proud to own. Since its listing on the New York Stock Exchange in 1994, it has increased its dividend by 4.7% per year. This rate isn’t going to win any sprints, but it did help the stock generate a whopping 2,700% return for investors who reinvested every dividend.

A series of retail store closings in recent quarters has depressed Realty Income’s stock price and, as a result, increased its dividend yield. The stock recently fell an attractive 5.4 percent. Retail closures are a valid concern, but selective tenant choices over the years have isolated this particular REIT from the fallout.

Almost all of Realty Income’s properties are stand-alone single-tenant structures instead of shopping malls. Its main tenants are Walgreens, LA Fitness, AMC Theaters, Wal-Mart, Dollar General, FedEx and CVS.

Most importantly, Realty Income specializes in commercial properties rented on a “triple net” lease basis, meaning that the tenant pays not only the rent but also the maintenance, insurance and property taxes. In addition, Realty Income typically rents its properties for the long term, with contracts in effect for 10 to 20 years.

This gives the company a reliable source of revenue that has enabled it to make more than 570 consecutive monthly dividend payments to patient shareholders. It is a promising candidate for your portfolio.


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