Reduce your risks and improve your returns Part 2 By Perrii Muthuraman

A few days ago, I was reviewing the investment portfolio of an investor that mainly consisted of residential rental properties. Based on the information that I provided for her, she felt that I should incorporate into my review more on the “nitty gritty” on the opportunities for investors with Insurance and the importance of having it (insurance) for children also. She further said, “I think a lot of people sign up for insurance without really understanding how it works or the advantages that are available with regards to getting the principal back, or contributions compounding. I also think people sign up and don’t think about it again and have peace of mind just thinking they are covered, (actually not knowing what is covered)”. So accepting her suggestion, I am going to present a series of ideas on Insurance.

Here’s Part 2

In part 1, we compared the Participating Life Insurance with GICs. In part 2, we compare it to an investment portfolio consisting of bonds and equities, which can be either aggressive or conservative

If your goal is aggressive investments, then Participating Life Insurance as an investment is not an appropriate alternative.

What is an aggressive strategy?

An aggressive strategy aims higher returns and requires an active management. Since you will find more volatility under an aggressive strategy, you would need to actively watch to make frequent adjustments to tailor it to changing market conditions.

A conservative strategy is a “buy-and-hold” strategy and it generally suits people who are less risk tolerant and devote passive time for investments. But this strategy also involves relatively little risk and volatility. Investors in this strategy can identify themselves with the tortoise in the well-known story of the tortoise and the hare. Slow and steady.

As an investment, participating insurance is suited for you, if you are a conservative investor and looking for diversification with no volatility at all. Its yield can be compared well with the bond funds or balanced funds, without any downside risk of even little volatility. It gives tax advantage also over the conservative fund or portfolio. In addition, it offers life insurance, which can be treated as an added bonus. But remember it is a long term commitment.

Some people may suggest to buy a term insurance (since it is cheaper) and then invest the difference in an aggressive or conservative portfolio instead of buying a participating life insurance. If you are a believer of that strategy, just check whether you would get a higher return than the return on participating insurance to compensate the tax-sheltered growth offered by participating insurance while the risk level remains the same. Often it may not be possible.

This is the conclusion of this part. Participating insurance is a good investment for you if you are not a sophisticated investor. Certainly, you can allocate a portion of your savings to this strategy. As already mentioned in part 1, participating insurance offers a much higher return than bank GICs and also an effective alternative to bonds, balanced funds, and preferred shares.

Insurance thus can help you not only with “Peace of Mind” but also “wealth’ itself, in the wealth building process. To know more or to review your current portfolio without any obligation or simply just to have a second opinion, you can contact the author at 416 473 6100 or email:

Actionable Idea: 1. Review your existing portfolio

2. If needed get a second opinion.


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