Posted on March 21, 2009 - by Eng Tiang Chuan

Shielding Against Creditors & Avoiding Untimely Liquadation

Photo by Dave-F

The performance of different investment options are beyond the control of investors. Followers of Modern Portfolio Theory believes that there are 2 types of risks – Systemic and Non-Systemic (or aka un-systemic). Non-systemic risks can be minimized through diversification. Nothing can be done about Systemic risk. In that sense, one can do something to their portfolio to minimize risk through diversification. Other controllable factors would include asset allocation, rebalancing etc.

Most serious investors would be interested in the factors listed above. However, 2 factors are often overlooked -

1. Avoiding forced liquidation at the wrong time
2. Protecting those investments from creditors

Scenario 1 could happen if the investor were to pass away during a market downturn, like now. Assets that are force-sold due to probate process could fetch just half their price.

Scenario 2 could be a concern for business owners or members of the management. Their family members could be easily affected as assets are taken away by creditors. Even insurance policies with cash values could be taken away. Read more…

Related posts:

1. Avoiding the memory effect
2. Diversification
3. Managing investment risks