“Just because you can, doesn’t mean you should.”

“Just because you can, doesn’t mean you should.” It is a phrase often associated with a new investment product or strategy, such as a new specialty fund. There is a never-ending list of new products and revived investment ideas whose risks are capable of derailing your long-term plans.

One of the most recent ones involves pension and settlement income streams.

The Securities and Exchange Commission (SEC) and FINRA recently published an alert about Pension and settlement income streams.  They are often pitched as pension loans, pension income programs, mirrored pensions, factored structured settlements or secondary-market annuities.  These are investments intended to provide a stream of income based on someone else’s pension or lawsuit settlement.

The appeal of these investments is the 5.75% to 7.75% yield. The downsides are the high transaction costs, the difficulty of selling them, the risk you may not be paid and the risk that the agreements may not even be legal. In other words, these can be investments that are too good to be true.

There will always be investments that sound appealing. However, some investments are often pitched to benefit the seller or the company facilitating the transaction, not the investor. This is why just because you can buy an investment, does not mean you should.

Source:  American Association of Individual Investors

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida.