Thursday, April 21, 2005

The investing game

I've been getting an education ever since the bar exam ended in February. Most of March was spent taking a Century 21 real estate class -- with my Dad. Never done that before. I learned that (1) he can't whisper, and (2) he can't hear anyone else whisper. This meant we'd sit a few rows back and try to talk in a moderate tone.

I finished and passed the class, but still have to take a state exam to be licensed. Unlike the rest of our classmates, neither of us had any interest in becoming real estate salespeople. He thought he'd like to learn more about commercial ventures, and I figured I could no longer plead ignorance on the subject. Plus, knowing real estate in Las Vegas couldn't hurt a lawyer.

The education doesn't stop there. With large initial payments from the sale of the store coming by the end of spring -- we hope -- we've started investigating some of the more low-risk investment opportunities for my parents: certificates of deposit, tax-deferred annuities, and something I learned about today, viatical life insurance settlements.

(Side note: If you know me, you know that I'm living proof that math and economics are not the same thing. Math I intuitively understand, or at least once understood, but economics go over my head. Thus the need for independent study.)

"Viatical," according to, means
"pertaining to the purchase of insurance policies from terminally ill policy holders." Wait, it gets more morbid. I was under the impression that investors just contributed to some sort of general investment fund, and the insurance broker would use that money to buy out some random policies. No, it's personal. You pick the policy, and your investment goes toward the cash payout to the original holder. (The company has a little video presentation narrated by former NFL commentator Pat Summerall that explains that what you're doing is helping those in need.) Anyway, you get your portion of the benefits, a ridiculously higher return than your investment, when the original holder dies. As soon as a death certificate is presented to the insurance broker, they call the investor and ask whether a check or wire transfer is more desirable.

See? Morbid. Still, the greed element is less pronounced because this form of investing isn't affected by market fluctuation. For that, we turn to those CDs and annuities. Interest rates have been rising steadily, thanks to factors attributed to the current administration, fairly or unfairly. The guy we spoke to today privately informed us to wait a few days, when one CD rate would increase from 4.19% to 4.34%. It's gotten to the point where we make note of an impending Federal Reserve meeting, because my parents are financing the store's sale with an interest rate related to the prime lending rate.

Bigger returns on your investments. This must be how one gets seduced to the dark side.

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