These are personal views about saving, investments and organisation managed by Government of India. These views are influenced by fundamental principles of financial planning. These views are not recommendations.

1. LIC OF INDIA:- THE REAL TRUTH
Doesanyone complainabouttoomuch interference of AmbanisinReliance?Doesanyone complain
aboutInterference of TatasinTata group of companies?Thenwhywe hearlotof criticismwhenit
comesto Life Insurance Corporationof India.Itisa Governmentof India’s Company,if Government
will notinterfere thenwhowill interfere?
Life insurance of Indiawasconstitutedby Governmentof Indiain1956 withspecifiedobjectives
whichare still intact.Amongall the objective followingfew objectivesare noteworthy
 Maximize mobilization of people's savings by making insurance-linked savings
adequately attractive.
 Bear in mind, in the investment of funds, the primary obligation to its policyholders,
whose money it holds in trust, without losing sight of the interest of the community
as a whole; the funds to be deployed to the best advantage of the investors as well
as the community as a whole, keeping in view national priorities and obligations of
attractive return.
 Conduct business with utmost economy and with the full realization that the
moneys belong to the policyholders.
 Act as trustees of the insured public in their individual and collective capacities.
 Meet the various life insurance needs of the community that would arise in the
changing social and economic environment.
Considering these objectives the role of Lic of India can clearly be understood from individual
perspective and also Nation as a whole.
We simplycannotforgetthe pastfromwhere Indiaasanationstarteditsjourneyafterindependence
withall the meagre resourcesithad and role playedbyLicof Indiain thisvast journeyand missionof
Nation building.
There is lot of scepticism, criticism and also apprehensions about lic`s investment pattern. These
criticismare generallymade byself-proclaimedinvestmentgurus,fundmanagers,authorswho have
writtenfewbooks,oranalystsoftenfundedfortheirarticlesfrombiginvestmentbroking houses.The
only objective behind this is to create a confusion and disillusionment among investors, shake their
confidence and trust in Lic of India and divert their investment to equities or Mutual Funds.
Theyadvise investorstobreaktheirendowmentpolicyandinvestinmutual fundorequities.Theywill
simplyadvice/dictate itwithoutanyunderstandingof familybackgroundor financial standing of the
client(asseenonsome TV shows).Thisissimplylikeadvisingtoremove the groundflooranddirectly
construct the second floor.
AnotherallegationisthatLic Returnsdoesnot meetinflation.Itgives6% - 7% returnsand inflationis
8%. So after long term of investing in lic endowment plans the returns are not going to meet your
needs.Sowhytoinvestinlicendowmentplans.SobetterbuyaTerminsurance plan,rather“aCHEAP
TERM INSURANCEplan”andremaininginvestinMutual Fund.Terminsurance will giveriskcoverand
Mutual fund will give returns 12% - 15% returns. Wow!! Eureka!! But I really wonder about the
accountability and moral responsibility of these Investment Messiahs towards humble investors.

2. Many investorshave brokentheirlongTermsavingsanddivertedtheirsavingsinMutual Fundsand/
Equities.We all know howmuchreturnsinvestorshave actuallyreceivedsince the recentcorrections
in the marketor BJPcomingto powerin2014. How manypeople actuallygot10% to 12% returns on
their investments investing in market? But almost all the investors (policy holders of Endowment
plans) in Life Insurance Corporation of India received 6% - 7% returns on their investments. And
receiving money on right time in right hands and right amount is important and not ROI (Return on
Investment). Most of the people buy endowment plans not just for risk cover but for a purpose like
childmarriage,childeducation,retirementetc.Canone expose theseimportantdutiestoMarketrisk?
We all know what happened to millions of investors in 401k scheme in United States of America in
2008 when market crashed. Now the question comes how important is ROI when it comes to Child
marriage or Child education or retirement. Why to put entire future of your beloved family just for
extra returns of 3% - 5% when you compare Endowment policy returns of 6%-7% with Mutual Fund
returns of 10%-12%. The risk reward ratio is also to be considered.
InvestinginLicendowmentpoliciesdoesnotmeannotto investinanyotherinvestmentoptionslike
Mutual Funds or equities. They are also important but not at the cost of lic endowment policies.Lic
endowmentpolicesare like Foundationof a BuildingconstructionwithlessreturnsandMutual fund
and equities are alike 2nd
and 3rd
floor. You cannot build a strong building without solid foundation.
There isno replacementforLicEndowmentpolicies.Butthe advice givennow adaysin the marketis
breakthe foundationanddirectlybuild2nd
floor,i.e breakyourendowmentpoliciesandinvestin2nd
and 3rd
floor. This is not a right advice.
Nowthere isnewdiscoveryof allegationsthatLicof Indiaisa“BADINVESTOR”.Itinvestsinbadstocks,
loss making companies, funds five year financial planning, subdues to the whims and fancies of
Governmentof Indiaand playswiththe investormoney. Soagain save your hard earnedmoneyand
stop investinginlic. Well the total investmentportfolioof Life Insurance Corporationisnearly 19 lac
crore rupees. How many mutual fund are actually of that size and how many fund managers have
handled this quantum of money. The objectives are different for everyone so is with Life insurance
Corporation of India. We need to understand that insurer cannot do investment as per their whims
and fanciesor underpressure of any thirdparty. All the investmentsdone are governedbySec 27 of
Insurance Act 1938 as shown in following table.
Sr.No Type of Investment Percentage
i) Government Securities 25%
ii) Government Securities or other approved
Securities (including (i) above)
Not less than 50%
iii) Approved Investments as specified in Schedule I Not less then 15%
a) Infrastructure and Social Sector Not exceeding 35%
b) Others to be governed by Exposure
norms as specified in regulation 5.
Investment in “other than approved
Investments” can in no case exceed 15%
of the fund.
Not exceeding 15%

3. Following table shows the total investment in different segments as directed by sec27
insurance act 1938.
TYPE OF INVESTMENT AS ON
31.03.13 31.03.14 31.03.2015
01 Central Government Securities 470254 543636 635365
02 State Government & other
Govt
Gauranteed Marketable
Securities
261852 327861 424599
Sub – Total (A) 732106 871497 1059964
03 Housing & Infrastructure
Investment
(a) Housing 46276 45317 56825
(b) Power 93317 104450 117759
(c) Irrigation / Water Supply
& Sewerage
3388 3051 2670
(d) Road, Port & Bridges,
Railway
11208 10187 10119
(e) Others (Incl. Telecom) 35076 35267 39433
Sub – Total (B) 189265 198272 226806
Total A+B 921371 1069769 1286770
Consideringthe above tablesitisclearthat investmentsof Life Insurance Corporationof Indiaisnot
a riskyinvestmentandno specificsegmentinrealitycan affectthe policyholder’smoney.Itis 100%
safe andalsoenjoysthe sovereignguaranteebythe Governmentof Indiawhichnootherorganisation
enjoy.
We needtounderstandthatall these allegationsare done justtoscare the common investorswhose
primary job is not to study market and become an investor and earn from their investments. But to
cut downtheirexpensesandsave the portionof theirincome forcertainfutureneedslikeretirement
or childmarriage withsome growthin it,be it6% or 7% growth alongwithveryless or no riskon the
capital amountsaved. Thisiswhatwe call asfoundationandgroundfloorof financial toweryouought
to build. But the advice given is breakthe ground floor and directlystart with second floor i.e break
your endowment policy and invest in Mutual funds or equities.
The highestreturnone cangetis fromthe professionhe isinvolvedinandnotfromanyothersource.
Saving is very important and saving and investment in multiple options is a very good advice. But
breakingone investmentandinvesting inotheroptionisnotagoodadvice.The purposeshoulddecide
the choice of asset or investment options and not return on investment (ROI). In Indianculture long
termsavingwas always advised andalsonottoput all the eggsin one basket.Butrecentlythe Ganga
is flowinginoppositedirection.All the investorsshouldfocusonprinciple of investmentandnot just
on ROI