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Tax Lien Investing is a black box for most people
Thought of the day | July 3, 2007 3:32 PM
You ask ten people at your work place what is Tax Lien Certificate or what is Tax Lien Investing ... you'll get no answer. Still, the competition at the tax auctions is fierce. How come then? One answer I can think of is that the purchasing tax lien certificates type of financial transactions are not really popularized anywhere because they are to complex for an average investor to comprehend ... Or are they? Wrong answer. I believe that the true reason why most people never heard of Tax Lien purchasing is because it is too expensive to get in and so it makes no sense for media makers to advertise or popularise ... because only a few people will actually be able to follow up. Basically, this is the type of investing only rich people can afford. Another maybe absurd but true reason is that Tax Lien investing is a much safer investing option than stocks for example and it also a slow process that requires lots of home work and diligence to execute. Most people rather jump into gambling on stock market to get their adrenaline pumping in hopes to make a quick buck fast. A good analogy would be comparing water-skiing to fishing. Both water sports; you get your adrenaline pumping on water-skis but you can also break your head while if you're patient enough and can study you may catch a good size fish and actually enjoy eating it. Tax Lien Investing is just like fishing. Everyone thinks that riding a sport boat is cool (just like buying stocks) but many also believe that fishing is very hard. So, it's not that it's little known ... it's very well known among rich people and financial professionals. I believe that banks use Tax Lien as one of their primary investment tools - how do you think they can guarantee you 5% returns on your CD's or money market accounts?