Investors tend to succeed in buying paper by diversifying their investments. Judgments are deeply discounted, in part because the risk in successfully executing any individual judgment may be high. By acquiring numerous judgments at deep discount that risk is greatly minimized because even if several judgments fail to net any return, the successful execution of a relatively small percentage of judgments tends to offset the efforts that are less successful.
In addition, many investors succeed in generating positive returns by buying judgments and selling them for slightly more than they paid. In that sense, buying judgments can be similar to purchasing any other asset (like a house, a car or a chair) for purposes of resale. By “flipping judgments” some investors succeed in generating positive income without taking any steps toward execution.
Like any investment, judgment investment involves risk and past success is not indicative of future returns. That being said, in our opinion, judgment investment is an attractive option in comparison to many other conventional investment opportunities.
