What effect does a high equity investment have on variable life funds?

A high equity investment in variable life funds can lead to the potential for higher returns but also entails greater risk. This is because equities, or stocks, are more volatile than other asset classes, such as bonds or cash equivalents. When the market performs well, equities can significantly increase in value, which would enhance the overall return of the variable life fund. Conversely, if the market declines, the value of those equities can decrease, potentially leading to losses.

The essence of variable life insurance is that the cash value can fluctuate based on the performance of the investments chosen by the policyholder, often including significant equity exposure. This inherent risk-reward trade-off makes the option of a high equity investment appealing for those willing to accept the possibility of greater fluctuations in their portfolio's value in pursuit of potentially higher long-term returns. This dynamic is crucial for policyholders to understand when making investment choices within their variable life insurance policies.