Two more schemes on the list of the Top Investor Traps of 2009 are Life Settlements and New Inventions and Speculative Products.
Life Settlements
A life settlement involves the sale of a life insurance policy to a third party investor – for less than the face value of the policy. For example, I take out $100,000 worth of life insurance on myself, then sell the policy to a stranger for $80,000. I have cash in hand to use immediately, and upon my death, the new policy owner receives $100,000.
Life settlement transactions have helped some people obtain funds needed for uninsured medical expenses and other purposes. But those benefits often come at a high price for investors, particularly senior citizens.
Wide-ranging fraudulent practices in the life settlement market include Ponzi schemes; fraudulent life expectancy evaluations; inadequate premium reserves that increase investor costs; and false promises of large profits with minimal risk.
Speculative Inventions and New Products
New investment products are being invented all the time. Many are extremely complex. New products are for venture capitalists who know how to assess the risks. They are not good investments for your retirement money even though they may promise high returns.
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