Is it a good idea to invest in LIC stocks? | Welfin Best Financial advisor in Kolkata
Our answer rate for investment in LIC stock is 98 percent, YES, and only 2% NO. The obvious reason for this is that critics of India’s LIC only have one argument to make: LIC returns are lower. So, if you compare India’s insurance behemoth just based on returns, there’s a chance you’ll come out with a 2% worse return. But trust us when we tell that everything comes at a price.
The Pros and Cons of investment in LIC stock
Let us now look at the advantages and disadvantages of investing in life insurance policies that are based on endowment (savings). Let’s begin with the drawbacks.
The Cons of LIC investment
Three common criticisms of investment in LIC stock are as follows:
Reason 1: Is the net money return on investment (ROI) low?
One of the most common criticisms of endowment-based LIC programs is this. To evaluate the validity of this argument, we must first understand the “Rule of 72” and its importance in evaluating investment returns. According to this theory, the actual return on any investment with a guaranteed level of growth after paying income tax is just 6% to 8% after paying income tax in India today. In our previous essay, we discussed the rule of 72 in further detail.
An illusory truth effect is a psychological approach to making falsehood appear genuine through repetition. We just meant that you are being led to believe that LIC offers lower returns.
Is it true that LIC exclusively offers long-term plans?
This is another major problem for LIC. The victims are mostly under the age of thirty. This is accurate. According to the specified plans, the least tenure provided is 10-12 years, and the highest policy duration is 30-40 years. But why? There are two reasons for this.
The first reason is that life planning is a long-term process.
The LIC provides life insurance coverage. This refers to commodities that grow and develop in lockstep with the policyholder. Every life scenario requires a partnership, whether it is for our children’s education, the development of a marriage fund for our daughter, the preparation of our retirement, or the establishment of inheritance for our future generation.
The timetable for a life fund must start now and finish when the need is met.
That date cannot be in the next 2-3 years, much less the next 5 years. Tell me about a regular guy who begins a wedding fund when his child turns 18. No responsible parent will begin saving for their children’s higher education until their children have completed high school. The importance of a long-term investment strategy is shown in these circumstances.
Reason 2: LIC is unable to guarantee short-term profits.
For infrastructure projects and other development initiatives, the Union Government and state governments are the main lenders of the Life Insurance Corporation of India. The LIC’s help is routinely requested to resurrect PSUs. Indian Railways are in the same boat. In the 2019 budget, railways are scheduled to get 1.7 trillion dollars. As a result, LIC’s investments are all long-term and in government-backed guaranteed funds. Because the assets are safe, the revenues from such debt funds are also guaranteed for LIC. The policyholder is in a similar situation. We can expect a set rate of return on our investments regardless of market conditions.
I hope you saw what I meant. LIC is for persons with a long-term perspective on life. Short-term saving goals can be met with a variety of choices, such as recurring deposits or bank fixed deposits. Please don’t blame LIC for anything.
Reason 3: No increases in premiums for existing policies
People regularly ask if they may pay their premiums in installments. For example, they intend to invest 1000 rupees this month. If they have additional money next month, will they be allowed to put 2000 instead of the regular Rs.1000? The answer is “no.” Why?
Insurance is a legally binding contract.
Each LIC insurance policy is essentially a contract between the firm and the insured. The basic terms and conditions state that LIC would protect the nominee for the duration of the policy with the Basic Sum Assured (+ bonuses + benefits), assuming the policyholder pays all due premiums on time. Because this contract is solely applicable based on premium payment, there can be no variable premiums.
Customers can purchase as many insurance policies as they want, based on their financial condition and health. Changing the premium on a running insurance policy, on the other hand, is not permissible.
Pros of Investing in investment in LIC stock
- Coverage
- Accident Protection Insurance
- Medical Insurance
- Credit availability
- Security deposit.
- Sovereignty Guarantee
- Tax-free 10(10(D) returns.
- Tax exemptions for those under the age of 80 (C)
Nothing is perfect. Everything has benefits and drawbacks. LIC plans are also an excellent investment. If we approach the Life Insurance Corporation of India with a one-word solution to all of our financial problems, we may be disappointed. As a result, keeping a balance between LIC and other portfolios can be a more sensible choice.
Drama abounds in life. No dress rehearsals will be held.
A wise man learns from the mistakes of others. Spend some time contemplating; it will be well worth it. Everyone who is now considered old and impoverished had their chance.
We’re all talking about money! The first and most critical step, though, is to save. To attain this goal, we’ll need the help of a trusted partner who can help us save regularly, grow our savings, and keep our hard-earned money safe.
Your decision is crucial.
The Life Insurance Corporation of India (LIC) has a variety of policies to fit any budget. Schedule a meeting with one of our representatives right away. We are glad to be of service to you. A bright future is guaranteed with investment in LIC stock! Best regards.
