We often hear that life insurance is a contract that is locked in for 8 years. Obviously, this is not true! Apart from the tax aspect, which we won't go into today, which is favourable once the policy has been in force for 8 years, it's the asset allocation that determines the investment horizon. Why this duration? What does it mean?

The investment horizon

This term is used to determine the estimated time at which the funds will be used. It is an essential element in recommending the right investment, both in terms of amount and type of investment. In this case, to invest in a life insurance-type investment, it must be adapted to the investment horizon. Given the fall in returns over the last few years on the safe 'pocket' of this envelope, the Euro Fund, it seemed normal to all financial advisers to propose diversification of the allocation by placing all or part of the contract in Units of Accounts. This segment may contain units in Undertakings for Collective Investment (UCIs) in equities, bonds, money-market instruments, property or a mix of several types.

Variations in the financial markets de facto lead to variations in the different types of UCI. Over a medium- to long-term horizon, this is a strategy that generally pays off (see diagram below), since over the long term, market rebounds compensate for declines. That's why it's important to keep in mind the time horizon that has been set. Contract values fluctuate constantly, so they may well be disappointing at one moment but rebound the next and exceed expected returns. This is neither natural nor obvious, but our advisers are there to answer your questions.

Past performance is no guarantee of future performance

The benefits of programmed payments

One of the best-known asset management strategies is to set up scheduled payments to smooth out entry points. What's in it for you? Here's an example with figures:

In this scenario, smoothing was particularly effective given the volatility of the investment. But since dynamic investments sometimes make it difficult to know whether the value is at a peak or a low point, smoothing the entry points is an effective solution for limiting risk and optimising performance.

Financial investments are complex and numerous. At the heart of life insurance are a multitude of possible allocations. To make the best choices for your needs and expectations, it's essential to work with financial investment specialists. Wealth A7's team of wealth management advisers are here to analyse your situation and advise you, so get in touch!

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