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In banks and insurance industries today, almost half of the sales turnover came from selling investment linked insurance products.

These are almost always linked to investment funds. Most of the public how would like to invest on investment funds are either persuaded to buy such products or do not have the knowledge to choose what's really suitable for them. Today, I would like to briefly explain about the basic structures of such kind of products. Diversification is one aspects of investing that plays a crucial role in helping you spread the risk that is associated with any given investment.

It simply implies investing in many different types of stocks, shares and bonds, such that if one carries a high risk factor, it is covered by another whose risk factor is not as high. For example, it seems to be generally agreed that small cap companies are those that have a value between $250 million and $
2. 5 billion, mid cap companies fall between $
2. 5 billion and $10 billion and large cap falls between $10 billion to over $200 billion. However, these figures are not constant because they are dependent on the market conditions. So what drives them to do it so hard? Yes, you guessed it right. Money.

These investment linked products always provide the salespersons with enormous amount of commission. As high as 50% of your first year payment could possibly entirely goes to the pockets of the person who handed you the pen for signature. What I can say is there is nothing you can do about it in a capitalism society. This classification has helped such small and probably unrecognized companies to be partakers in the stock exchange market. As you choose to invest in mid cap companies, it is good that you familiarize yourself with the features that are characteristic of the category. One thing that you must be aware of is that mid caps are much more risky than large cap stocks and less risky than small caps. Lastly, the fund manager takes a sip of what they earned for you, of course. This is the only cost I think reasonable. After all, they are the ones who executed the buy sell commands for you. But do not be naive and think that they really work hard to earn as much for you as possible. What they really care is to stick to the policy and make sure the growth rate does not fall below a certain level so that they keep their high pay job. So now you know.

You can go ahead and decide whether to answer the call from your 'personal financial planner' next time. God bless.
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