Asset Allocation
What Does Asset Allocation Mean?
Asset allocation is the process of tailoring investments to meet an individual’s specific needs. In other words, it involves customizing investment strategies based on factors such as age, risk tolerance, future plans, and similar considerations. In the context of insurance, many life insurance companies utilize asset allocation to help policyholders identify suitable investment options.
Insuranceopedia Explains Asset Allocation
There are three primary asset classes: fixed income, equities, and cash equivalents. Each of these classes includes various options that offer different levels of risk and reward. Many life insurance policies include an investment component designed to increase the policy’s cash value. The choice of assets for fund allocation largely depends on an individual’s financial goals. Some people are comfortable with higher risk if it promises potentially greater, short-term rewards, while others prefer lower-risk options for stability. Regardless of the preference, life insurers often provide asset allocation services to assist policyholders.
