Posted in Finance, Accounting and Economics Terms, Total Reads: 94
Definition: Valuation Period
Valuation period is the time period which is used to evaluate the unit value of a variable security or annuity. It is generally the time difference between the end of the working day of the first working day and the end of the working day of the second working day. The evaluation of the unit value is done at the end of each business or working day.
Variable annuities are products that provide annuity payouts based on their current value. The insurer is guaranteed a minimum payment and the remaining depends on the performance of the portfolio. The periodic payments may start immediately or on some future agreed upon date. Variable annuities are tax deferred which means no tax is needed to be paid on the income or the investment returns through variable annuities.
A variable annuity has two phases: an accumulation phase and a payout phase. During accumulation phase, allocation of money takes place. The money can be allocated to number of funds like bond funds, stock funds etc. The money which is allocated will increase or decrease according to the performance of the funds. In the payout phase, the periodic payments start and also if any investment gains have been earned by the insurer. There are many ways that the insurer can choose to receive them. It can be received as regular payments or a lump-sum amount.
An investor can invest in various annuities using various investment vehicles. Variable annuities provide great returns but it is also riskier than others. The value and payout depends on the performance of the annuities at the current time. Since it is riskier than others hence growth isn’t guaranteed.