Human Capital, Asset Allocation, And Life Insurance

Basics: age & income & specific responsibilities in life matter in the mix of assets in one’s portfolio.

One of the key benefits of universal whole life insurance happens to be this form of insurance allows an individual to adjust their coverage levels based upon their variables and conditions within their lives. This is a very important advantage of universal whole life insurance because an individual’s financial status and social economic conditions can vary throughout their lifetime. This can cause a need for variations in their life insurance coverage levels. Another important advantage is that the interest rate at which universal whole life insurance policies grow is established or guaranteed. A third advantage of universal whole life insurance is an individual can increase or reduce their death benefit when situations

“The Benefits of diversification are clear. Portfolio theory has played a crucial role in explaining the relationship between risk and return where more than one investment is held. It also enables us to identify optimal and efficient portfolios.”

For many years, the organizations had purchased life insurance for their employees, the key reason is that through some key personnel from the insurance company to maintain their own financial loss on their lives when events occur (Martin, 2010). On the other hand, the insurance company by emphasizing their tax advantages, to encourage corporations to purchase the corporate-owned life insurance. The goal of corporate-owned life insurance is corporations need to take large loans in order to pay for the insurance fee and make the maximize profits of tax. At the same time, the corporations can get a large amount of income tax from their interest payment. However, in 1986, the insurance organizations established new form which named Tax Reform

Many risks occur when gaining wealth, such as debt. People of high risk of often assume debts is not a problem for them. They begin to assume that they can pay back debt loans when they get more money, putting themselves further in debt even more than before. Recurrently, they will remain

Cernauskas, D., & Tarantino, A. (2011). Essentials of Risk Management in Finance. Hoboken: John Wiley & Sons, Inc.

After reading The Motley Fool articles on life insurance, a few situations come to mind in which purchasing any such policy may be ill-advised. While certainly a savvy estate planning investment for some, it is not the best investment for all. Furthermore, with so many different types of possible policies one is not a blanket “great” investment for every individual. The people who life insurance is most valuable for is those with dependents (ie. a spouse or children). However, individuals with no minor children, or no children at all, and no spouse likely do not need life insurance. It would be quite silly for me to in my current condition purchase life insurance because no one relies on my income in the short or long-term. Since my death would not financially impact any of my family members, I would not buy life insurance. Having no dependents or no outstanding debt is one condition where I would consider an investment in life instance to be unnecessary.

As expected, the log of income was statistically significant to the accumulation of financial assets. As noted earlier, a nonlinear relationship exists between income and financial assets as pre-retirees are predicted to accumulate wealth, while also increasing consumption, as their resources increase. The impact of income on the growth of financial assets is positive, yet lessens as the value of income increases. For example, a one percent increase in

Younger generations think they have plenty of time to plan and retirement seems too far in the distance future. But the earlier they begin saving for retirement, the more financially stable they will be at retirement age. Saving a little over a longer time accruing interest over the persons working years would develop into a nice retirement nest egg. Youth today will need to work harder at saving, in comparison to their grandparents and even their parents, due to economic factors and because social security and pensions lack reliability.

Insurance provides protection against economic misfortune or ruin. Health insurance protects against financial loss due to sickness or accident, life insurance protects against financial loss due to death, property insurance protects against financial loss due to destruction of property, and casualty insurance protects against financial loss due to negligence or even crime. If citizens are not able to purchase insurance to protect their fortunes against these risks, many would suffer economically

Life insurance benefits everyone in many different ways. Life insurance is financial protection for dependents. This type of insurance provide financial protection for your dependents after your death. Cost and features play a big role when deciding what kind of life insurance to choose. The cost must be affordable for you to pay monthly and the features must fit you. Our hypothetical person has life insurance through the Army which is service group life insurance. A life insurance analysis should ensure that when a death occurs in your

Instead, the presumed opponent is Mother Nature. Professor Marvin D. Troutt, who wrote the classic work on game theoretical approaches to life insurance purchasing, explains how the potential consumer is at odds with nature: “there is the option of delaying the purchase for a number of years in the future at the risk that Nature, or chance, will intervene and allow death (or insurability) to occur before insurance begins” (Troutt, 1988).

Bob and Mary Martin are both 35 years old. Although they graduated from college almost 15 years ago, they have never developed a diversified investment program. What extra money they had was invested in high-tech stocks that did quite well until the last five years. Then, with the economic downturn, they encountered major losses. How could asset allocation have reduced the dollar amounts of the Martins’ losses?

In 2005, the vice president, chief investment officer, and their investment team met in order to compose a new asset allocation policy for the foundation’s investment portfolio worth $6.4 billion. One of the proposal’s suggestion was to reduce the overall exposure of the investment portfolio to domestic public equities. The proposal would also increase the allocation to absolute return strategies (with an “equitizing” and “bondization” program) and to TIPS. The new policy would slightly increase the Sharpe ratio of the foundation’s portfolio. They also needed to make a decision on a recommendation to pledge about 5% of the total value of the portfolio to Sirius V, which was the latest fund that specialized in global distressed real estate investments.

Harry Markowitz is highly esteemed as a pioneer in theoretical justification of investor’s behavior and development of optimization model for portfolio selection process. In 1990, Markowitz received a Nobel Prize for his contributions to financial economics and corporate finance, the first time presented in his “Portfolio Selection” (1952) and more extensively in his monography “Portfolio Selection: Efficient Diversification” (1959). His seminal works form the foundation of the Modern Portfolio Theory (MPT). Markowitz’ ideas ware later substantially expanded by his Nobel Prize co-winner, William Sharpe, who is generally recognized for his Capital Asset Pricing Model (CAPM) concerning with financial asset price formation.