With the current economy experiencing unprecedented challenges, many investors are turning to financial advisors for assistance with finding lower-risk investment opportunities with more stabilized returns. Diversifying your portfolio with less risky assets will help you stay the course during a volatile market. An option that’s becoming increasingly popular is structured settlement investments. Here’s a look at how this works and why it’s worth considering.

What to Know About Structured Settlements

What It Is

A structured settlement is a financial agreement that typically occurs as the outcome of a lawsuit, such as a personal injury case. As an alternative to receiving one lump sum payment from the defendant, the plaintiff will get a series of payments for a specified timeframe. It’s common for the defendant’s insurance company to manage these payments.

The option to invest in a structured settlement arises when the plaintiff decides they would rather get a lump sum than continue carrying out the terms of the payment schedule. Then, they may use a broker to help them secure an investor who will purchase the structured settlement for a discounted price. The plaintiff will walk away with one lump sum payment, and the investor will begin collecting the scheduled payments from the insurance company.

Benefits

Structured settlement investments tend to yield a high rate of return and provide the unique opportunity to receive a steady stream of income on a tax-free or -deferred basis. This is guaranteed money since it’s part of a legal contract, which allows investors to know exactly how much they’ll earn. They’re also considered to be a relatively safe investment by financial advisors because the payments are usually coming from reputable insurance companies.

Concerns

As with any investment vehicle, there’s some risk involved in purchasing structured settlements. The main concern is an issue of illiquidity. This means the investor has little flexibility in managing the investment, as they’re subject to the pre-determined payment schedule.

Additionally, there’s horizon risk with structured settlements. The investor’s money may be tied up in the investment long-term, and if they suddenly needed to sell, it can be difficult finding a buyer.

If you’re interested in learning more about structured settlement investments, turn to the financial advisors at Seeman Holtz in Boca Raton, FL. They’ll help determine if this type of asset meets your investing needs and work with you to finalize the transaction. Call (800) 991-3592 to schedule a consultation, or visit them online for more information about their services.