In the recent volatile markets investors remained with huge amounts of cash withdrawn from the volatile stock exchanges around the world or from selling (hopefully high) their mortgages or real estate properties. Of course, as any normal US investor, this huge amount of cash raises some serious issues: first of all a bank deposit cannot guarantee any longer a good return over the long term, secondly a bank deposit can be neither safe, as the recent news continue to prove (yesterday for example the Dutch government has injected $13,5 billion in the famoun European ING bank in a desperate attempt to keep it floating).
What to do then? Well, structured settlement payments can be one solution. This financial instrument consists in the client selling its settlement (potential or actual) to a specialised company and receiving back a lump sum of money – or an anuity, based on a negoatiated contract. Structured settlement payments look a lot like factoring, whereby you sell some uncertain future revenue for a certain present stream of revenues. It is like trading risk for return instantly.
You can sell your settlements regarding lawsuits, medical malpractice, personal injuries, wrongful death or anything else related to this type-like events. Structured settlement payments appeared to the highly litigating US environment, where the courts settle most of the high-value lawsuits on an economic basis rather that on a strict application of the law.
There are many companies which could help you transform your settlement into a cashing option. And of course, this makes sense when the value of the cash received now is much higher than the higher future value which you might receive for an uncertain outcome. However, as for any investment, you should be aware – there is always an assymetry of information between you and the settlement purchasing company. Whereas you as an investor have uncertainties about the outcome of the events leading to cash, the settlement companies have access to networks of lawyers and other specialists which can actually provide them valuable information of where the value lies in. The companies will also conclude the settlement until they reach the revenues outcome, but with much higher resources (at which individual investors rarely have access).
Nevertheless, in case of a high financial distress the utility value of the lump sum (or annuity) received right away can be much higher than a fortune you mkight get into the future. Therefore the structured settlement payment is an option worth considering – but not without pondering its pros and cons…
Article originally published by doitinvest.com on oct 24.
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