The most important determinant of an investor’s long run investment results is 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 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 risk such as equities, and assets which have lower rewards and lower risk such as government bonds. In other words, over the long term, policy holders 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 maximizing future value over the investment horizon. Risk tolerance is ability to tolerate either a more likely 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 i.e., volatility in returns should restrict their exposure to 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 high level of equities in their overall asset allocation.

We sincerely advice our existing and prospective policy holders to reflect on their risk bearing ability and choose as appropriate asset allocation and thereafter contribute regularly, either 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 policy holders with varied risk appetite and investment horizon. Details available in the below Exhibit 1.

(Please refer to 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

Equity

Risk-Reward Profile

High risk – High return

Investment Profile

Shares or equity of companies, prone to the 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

Balanced

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 protection of savings is the priority

Long term debt

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

Short term debt

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