Asset Allocation in investment

The most important determinant of an investor’s long-term investment results is the composition of assets or asset mix in the investor’s portfolio. While factors such as security and manager selection do matter, statistically speaking, their impact keeps falling as the investment horizon gets longer leaving asset allocation as the dominant factor driving investment results.

Thus 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 risks such as equities, and assets which have lower rewards and lower risks such as government bonds. In other words, over the long term, policyholders cannot expect equity type of returns by participating in pure debt funds (low risk –low reward) and vice versa.

An investor should balance risk tolerance* with the goal of maximising future value over the investment horizon. Risk tolerance* is the ability to tolerate either a more likely temporary, or a less likely permanent fall, in the value of the investment. Investors who do not have the ability to tolerate a fall in the value of investment from time to time i.e., volatility in returns should restrict their exposure to the riskier asset class of equities. Likewise, investors who have substantial working life ahead and who have limited financial liabilities in the medium term should take exposure to a high level of equities in their overall asset allocation.

We sincerely advise our existing and prospective policyholders to reflect on their risk-bearing ability and choose an appropriate asset allocation and thereafter contribute regularly, either on a monthly/quarterly or yearly basis, to achieve their long-term financial goals.

ICICI Prudential Life Insurance Company offers a wide suite of funds which range from equity funds to pure debt funds and also balanced funds (a blend of both debt and equity) available for policyholders with varied risk appetites and investment horizons.

(Please refer to the individual policy-related document for the availability of the funds as per your choice)

Equity
Suitable for
Young individuals who are in the investment phase for their long-term goals
Risk-Reward Profile
High risk – High return
Investment Profile
Shares or equity of companies, prone to volatility in equity markets
Balanced
Suitable for
Those in the middle stage of the investment phase or the last few years of their working life
Risk-Reward Profile
Medium risk – Medium return
Investment Profile
Shares and fixed income securities in different but pre-defined proportions
Long-Term Debt
Suitable for
Those who are retired or close to retirement and for whom the protection of savings is the priority
Risk-Reward Profile
Low risk – Low return
Investment Profile
Corporate Bonds or Government Bonds
Short-Term Debt
Suitable for
Investors who want to park their money for the short term before some other investment decision is taken
Risk-Reward Profile
Low risk – Low return
Investment Profile
Highly liquid, virtually risk-free, short-term debt securities of agencies of the Indian Government, Banks and Corporations and Treasury Bills

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Disclaimers
*Risk tolerance is a measure of the level of risk you can take on your investment.
^Please refer to the individual policy-related documents for the availability of the funds as per your choice.