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Alternative Investments

Video Text

NicoleHey guys today we're going to be talking to you about alternative investments so m. J. What is an alternative investment?  

MJWell, an alternative investment is any type of investment that is outside the normal scope of a typical investment option, a lot of people know stocks bonds, mutual funds. They know CD's but many people don't know that an IRA plan can also be invested in, say real estate. They can buy precious metals like physical assets, not necessarily, a stock or a bond and those precious metals or they can purchase life settlements or Merchant cash, which is a new booming industry. 

Nicole: MJ, why are alternative investments, not included in a typical 401k plan?  

MJWell, that's because a lot of 401k plans or employer sponsored plans don't offer investments like that. You need to have someone who has a lot of knowledge and typically a plan sponsor will, just go with one of the large companies, like let's say, Voya or principle and use, though their investments. I specialize in alternative investment strategies for individuals who want to invest in alternative investments but typically they're not going to be doing that with their 401k or 403b plan. If they are able to do an in-service distribution, they can move that qualified money into an IRA and in which case we can work with them and getting them invested into an alternative investment. 

Nicole: I was wondering if you could just kind of give an example of an alternative investment? 

MJ: Sure, one of the main alternative investments that we work with is something called the life settlement. In one of our Previous videos, we discussed the importance of life insurance, right? Everyone knows that life insurance. It’s a very strong industry and there has not been a life insurance company that has not paid a death benefit since the civil war. But if people stop paying or if life insurance companies stopped paying their death benefits, people wouldn't be contributing, right? They wouldn't be paying the premium and that industry wouldn't be booming. So, on the flip side, if you have an individual who has, let's say a million dollar life insurance policy, but they don't have an immediate need for the benefits,  they don't have other families, maybe they are well off, maybe their spouse predecease them and now, let's say it's a million dollars, that million dollar policy could cost them somewhere between fifty and seventy-five thousand dollars a year, that is a big nut to pay each every year, especially if you're on a fixed income, you know when you reach your eighties. So individuals like this can put their life insurance policy on the open market and at which point An investment like that would hit my desk and we would go through a large, a number of checkpoints to make sure that that policy is the right fit for our clients and at that point in time, we would offer that insured, anywhere between two to three times. What the cash value is in that policy, so it's benefiting them twofold. They no longer have to pay that expense and they also are getting a cash benefit at the time that they sell. Investors like it because they now have an investment that has a track record of double digit returns and they also know what that benefit is on the backend. You know, for that in one individual it's a million-dollar policy so we know that we can pay 50 to 75000 dollars a year in premiums. We maintain the policy until the insured passes away and at that point, all my investors will see the benefit of that million dollars 

Nicole: it's pretty interesting. If you guys have Other questions about alternative investments, our contact information is at the end of this video or you can post a comment or question below