Life insurance as a wealth planning tool

It is an asset class that can add value to any portfolio and meet life's changing needs

Most people perceive that the purpose of purchasing life insurance is mainly for risk management.
Most people perceive that the purpose of purchasing life insurance is mainly for risk management. PHOTO: ST FILE

In the world of investing, diversification is a common terminology used to describe the process of allocating capital with the view of reducing exposure to a particular asset or risk.

When you invest in the financial market, you are exposed to systemic - the market risk - and unsystemic risk - the unique risk. So investment managers use diversification to reduce volatility by investing in various asset classes.

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A version of this article appeared in the print edition of The Sunday Times on December 01, 2019, with the headline 'Life insurance as a wealth planning tool'. Print Edition | Subscribe