Here's a "Throwback Thursday" post, a blog entry I did in 2011 regarding an alternative low risk-high reward investment. It's still applicable up to now.
I would like to share an investment strategy that can easily beat the interest rate from savings, time deposit, special deposit accounts, money market funds, treasury bills and bonds. It's a low risk investment but can give you high rewards.
Pre-need plans. Yes, pre-need plans, but not through the traditional way of buying one. By traditional, I’m referring to you, dealing with an insurance company sales agent, then paying every year, then waiting for several years before you can get your money back plus the earnings. The unorthodox way of buying a pre-need plan is by acquiring it from another investor (i.e., from an existing policy owner). That means the policy owner will transfer the ownership of the policy to you after you have paid the asking price (through a middleman who can be a broker for the pre-need company). The opportunity for this unorthodox method comes whenever a policy owner decides to sell his policy due to an urgent need for money or the owner just can’t wait for the maturity date.
Let’s have a sample. Let’s say there is a pre-need plan worth 100,000 selling for 92,000 that will be maturing in 4 months. That means you can earn 8,000 for a one-time investment of 92,000. That’s 8.696% gain, which translates to 28.746% per annum. With such low risk, the return can be considered high already.
The question now is, how can you get such deal?
First, you need to have a contact in a reputable pre-need company or an agent/broker who has a contact or works for the pre-need company (let’s refer to this person as the middleman). Tell the middleman to inform you whenever a policy owner is selling his/her pre-need plan. You can now see that the middleman is very important since he/she will be the source of such deals.
Second, when there is already a policy for sale, check the details of the plan. When is the maturity date? How much is the policy amount (face value, or the total money you will receive upon maturity)? How much is the selling price? Given these information, you can compute the percentage gain as well as the interest rate per annum.
Third, decide if you’re happy with the interest rate per annum. This will dictate if the investment is ok or it’s better to just place the money in deposit accounts or other fixed-income instruments. Usually, I’ll consider the policy if the interest rate per annum is 13% or more. Sometimes, you’ll be lucky to have 68.394% per annum. :)
Fourth, try to bargain a bit, especially if you know that your preferred interest rate can be met if the asking price will be lowered. Bargaining may also give you higher interest rate (in case the original offer is already good). Sometimes, sellers give in to your request. Sometimes, they'll meet you halfway. Sometimes, they don’t. Just a piece of advice, if the rate is good already, take it right away. Otherwise, other people might steal the deal from you.
Fifth, fill up the information/transfer form and pay through the middleman. After a day or two, you’ll be able to receive a copy of the receipt as well as the transfer papers. The waiting period may vary, depending on the company.
After a few weeks, you’ll be able to receive the Certificate of Full Payment which already bears your name, and displays the policy amount and the maturity date. You'll also receive the pre-need policy transferred to your name already. Then, just wait for the maturity date. By the way, several weeks before the maturity date, the pre-need company will send you a notice for the procedure on how to redeem the pre-need plan (i.e., when and where you want to get the check for the payment). When the check is already available, just get it and enjoy! :D
Additional Notes from MYPG:
The approach I mentioned above may not be applicable to everybody. You need to have a trustworthy middleman, otherwise, you might experience sleepless nights while waiting for the transfer papers to arrive. :P Aside from pre-need plans, high school or college education plans may also be offered by your middleman.
Conversely, if you need to surrender a pre-need plan due to urgent need for money, you may also consider the approach I mentioned above. You might be able to get a better deal by selling your policy to a willing buyer, compared to the surrender price that your insurance company will offer.
Investement Alternatives
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