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Ask the Fool Life Settlements QWhat's a life settlement? - P.N., Chesterfield, Missouri AIt's when someone invests in someone else's life insurance policy, essentially buying the death benefit. The seller may be seeking income or may not be able to keep paying the premiums. Sellers are often very old and/or very sick. When a life settlement involves a terminally ill seller, it's often referred to as a "viatical" settlement. A life settlement buyer will typically pay less than the policy's death benefit, but more than the cash surrender value. Rates can vary widely, but here's a simple example: If a policy is set to pay $500, 000 upon the seller's death, the buyer might pay $300, 000 for it. When the seller dies, the buyer would receive the $500, 000, netting a $200, 000 profit. These settlements can be winwin propositions for everyone involved, but there are some caveats. For starters, sellers often have other options. For example, they might be able to borrow against their policy, or they may qualify for part of the benefit before death. Buyers, meanwhile, may not get the great return they hoped for if the seller lives much longer than expected, and they may pay significant premiums. These settlements can be complex, so do a lot of research before entering into one. You can learn more at Forbes.com/advisor/lifeinsurance/life-settlements. *** QWhat are "convertible" investments? - D.E., Ardmore, Pennsylvania AThey're securities such as bonds or preferred stock that can be converted into shares of ordinary common stock - at a certain price or in certain circumstances. They may provide more income than a common stock and potentially more gain than a regular bond, but they can be complicated and aren't best for beginning investors. Want more information about stocks? Send us an email to [email protected]. Fool's School Right on Target The term "asset allocation" refers to how a portfolio's assets are distributed - for example, among stocks, bonds and cash. Conventional wisdom recommends that we investors shift our allocations over time, lowering our portfolio percentage dedicated to stocks and increasing our bond holdings. That's a lot to ask of individual investors, though - to monitor and change our asset allocation over time. Financial services companies, therefore, now offer "target-date" (or "lifecycle") funds to make things easier.

These funds, which come from companies such as Vanguard, Fidelity, Charles Schwab and many others, each have a target retirement year typically reflected in their name. So a fund with the year 2060 in its name will invest its assets in a way that makes sense for those aiming to retire roughly 37 years from now - and will change its allocation over time accordingly. Consider, for example, a 2060 fund and a 2030 fund from a major fund company. The 2060 fund has around 90% of its assets in U.S. and foreign stocks and much less in bonds. That's reasonable, since stocks typically outperform bonds over long periods. The company's 2030 fund, though, recently had an asset allocation close to 60% stocks and 40% bonds - because the retirement date is only a few years away. You'll often find these kinds of funds available in your company's 401 (k) plan, and you can invest in them on your own, too, through your brokerage or directly from a fund company. Know, though, that they're not perfect. The asset allocations for funds targeting the same year can vary significantly by fund company, and they may not be exactly what you prefer. If you aim to retire in, say, 2030, you can always invest in a 2035 fund in order to be a little more aggressive, or in a 2025 one to be more conservative. Remember to make sure the fees are reasonable, too. In general, the lower the fee, the better, as even relatively small fees can really eat into your gains over long periods. My Dumbest Investment Sold on Overvaluation My most regrettable investing move happened when I was a new investor. I believed in Shopify and started buying into it in early 2017, not too long after its initial public offering (IPO). I accumulated about 50 shares at an average price of $65, but later sold at $200, thinking Shopify was overvalued. - N.M.S., online The Fool Responds: You couldn't have known just how the Canadian e-commerce platform would do in the future: Shares are up around 3, 500% since the IPO. You spent roughly $3, 250 on the shares and sold them for around $10, 000, netting about $6, 750. If you'd held on, your 50 shares would have turned into 500 shares after a 10-for-1 stock split in mid-2022. Remember, though, that with stock splits, stock prices are adjusted proportionately, keeping total investment values the same. The shares were priced near $300 apiece when they split, so they would have traded near $30 apiece after. Your 50 shares would have been worth around $15, 000 both pre-split (50 times $300) and postsplit (500 times $30).

More recently, Shopify has been trading near $50 per share, so if you still had your 500 shares, they'd be worth $25, 000. It's not crazy to have sold shares you thought were overvalued. (Maybe they were!) But if you're in it for the very long term, you might consider holding through periods of overvaluation, as good, growing companies can grow into and beyond a steep valuation. The Motley Fool Take Headwinds and Tailwinds for Crown Castle Crown Castle (NYSE: CCI) has been shellacked over the last year and change. Shares of the telecommunications real estate investment trust (REIT) were recently down about 28% year to date. This decline was mainly due to Sprint's merger with T-Mobile US. Sprint canceled its cell tower leases with Crown Castle, causing the REIT's revenue and profits to fall. Other headwinds putting pressure on its earnings growth rate have included higher interest rates and reduced customer capital spending. The good news, though, is that the worst should soon be over for Crown Castle. The company expects that its adjusted funds from operations (AFFO) will hit a trough in the first half of 2024, but then return to growth. Over the long term, Crown Castle projects organic (based on expanding capacity, rather than acquisitions) AFFO growth of 7% to 8% per year. Once the headwinds subside, Crown Castle can experience the full benefits of the long-term 5G tailwind. Investors salivating at Crown Castle's dividend yield - recently over 6.5% - shouldn't have to worry. The company is committed to keeping its dividend at the current level through 2024 and increasing it beyond 2025 once it gets past the remaining Sprint cancellations. (The Motley Fool owns shares of and has recommended Crown Castle.)