In any financial planning process, arriving at an appropriate asset allocation is the most important decision variable. In the asset mix, there are likely to be assets which have higher rewards and higher risk such as equities and assets which have lower rewards and lower risk such as government bonds.
Asset allocation is primarily determined by two factors:
(A) Risk tolerance
Risk tolerance is the ability to tolerate either a temporary or a (less likely) permanent fall, in the value of investment. Investors who do not have the ability to tolerate fall in value of investment from time to time should restrict their exposure to riskier asset classes, such as equities.
(B) Investment horizon
Investors with a long investment horizon, such as people who have substantial working life ahead and who have limited financial liabilities, should take exposure to high level of equities in their overall asset allocation. The prime reason being that these investors/ policy holders who have a long investment horizon would be able to regain from any short term equity market volatility as equity market returns would get normalized in the long term.
To enable customers like you to choose the asset allocation, our unit linked policies come with a suite of funds which range from equity funds to pure debt funds and also balanced funds to address the requirements of policy holders with varied risk appetite and investment horizon.
Refer the table below for details of these funds
Equity Funds |
Balanced Funds |
Debt Funds |
|
|---|---|---|---|
Suitable for |
Young individuals who are in the investment phase for their long-term goals |
Those in the middle stage of the investment phase or the last few years of their working life |
Those who are retired or close to retirement and for whom protection of savings is the priority |
Risk-Reward Profile |
High risk - High return |
Medium risk - Medium return |
Low risk - Low return |
Investment Profile |
Shares or equity of companies, prone to the volatility in equity markets |
Shares and fixed income securities in diffrent but pre- defined proportiions |
Corporate bonds or government bonds |
Disclaimer
The information being provided under this section ‘Investor Education’ is for the sole purpose of creating awareness about Life Insurance and for their understanding, in general. The views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. Many of the statements and assertions contained in this section merely reflect the views, opinions & belief of the individual writers and therefore BALIC does not in any manner guarantee the completeness, efficacy, accuracy or authenticity of such information. This information is not intended to be an offer or solicitation for the purchase or sale of any financial product or instrument. Before making any investments, the readers are advised to seek independent professional advice, verify the contents in order to arrive at an informed investment decision.
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