In India, people park all their saving in insurance and they expect that they would become rich. Insurance is risk management tool. It is not an investment. Are you investing? PF is another saving for working employees and it helps in time of retirement. Compare with LIC and PF, very less number of people invests in mutual funds and stocks in India. People are not aware of investment vs insurance. They consider insurance as investment, it ruins their financial freedom.
Considering insurance as investment is biggest financial mistake
Elite people and family friends who are working as LIC agent and they forced us to take LIC insurance with high premium. Recently one of my friend has taken LIC insurance with monthly premium of 8000 rupees. His take home salary is around 40,000 rupees. No other investments in his portfolio and only 20% in insurance is stupidity in personal finance. This 20% in insurance would never make him rich, other than life coverage. Term insurance would do better than insurance on life coverage with minimum premium.
Term insurance would do better than insurance on life coverage with minimum premium.
Have you ever thought of how LIC and EPF organization gives you 2%-6% returns for your so called investment as premium. LIC has to pay commission to insurance agent and it should cover its own expenses such as employee salary, infrastructure and maintenance of their offices. LIC invests the collected premiums in bonds, mutual funds, equities among other things. Funds can be of different types etc. The interest earned and returns made on investments is used to pay the compensation to insured people or policyholder.
LIC invests the collected premiums in bonds, mutual funds, equities
LIC holds 51% stake in IDBI bank.NIFTY 50 is index consisting of 50 large and liquid companies listed on National Stock Exchange of India (NSE). NIFTY 50 is the benchmark index of India, reflecting the overall conditions of Indian equity market as well as Indian economy. Over the years, NIFTY 50 has become the most widely used benchmark for exchange traded products in Indian equity market. LIC holds stake in 34 out of 50 in Nifty Index.
LIC holds 34 stocks out of the Nifty 50
LIC invested stocks:
Here list of stocks and share holding percentage of LIC.
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- Aditya Birla Capital Ltd 2.43
- ACC Cement 6.5
- ADANI POWER 1.56
- ADANI PORTS 2.55
- AMBUJA CEMENT 4.89
- ANDHRA BANK 2.64
- ARVIND LTD 1.56
- ASHOK LEYLAND 1.36
- ASIANPAINT 2.92
- AXIS BANK 10.37
- BAJAJ AUTO 4.6
- BAJAJ FINSERV 2.16
- BANK OF BADODA 4.01
- BANK OFMAHARASHTRA 2.61
- BATA 3.05
- Bharat Electronics Ltd 3.28
- Bharat Heavy Electricals Ltd 11.67
- Bharat Petroleum Corporation Ltd 5.88
- CADILA HEALTH CARE 2.92
- CASTROL 10.32
- Central Depository Services (India) Ltd 4.15
- CENTRAL BANK OF INDIA 6.19
- CIPLA 3.49
- CITY UNION BANK 3.86
- COLGATE 3.36
- CONTAINER CORP INDIA 3.18
- CORPORATION BANK 3.62
- DR.REDDY lab 3.91
- EDELWISE FIN SERV 1.14
- GAIL 4.99
- GICRE 8.66
- GODREJ INDUSTRIES 3.7
- GRAPHITE INDIA 1.89
- GRASIM INDUSTRIES 10.78
- GSK CONSUMER 2.67
- HAL 7
- HDFC 3.73
- HDFC BANK 2.52
- HERO MOTOCORP 5.54
- Hindustan Petroleum Corporation Ltd 3.74
- HPCL 3.74
- Indiabulls Housing Finance Ltd 10.78
- ICICI BANK 10.37
- IDBI Bank 51
- INDIAN BANK 1.85
- INFOSYS 5.85
- IOCL 6.51
- ITC 16.32
- India Tourism Development Corporation Ltd 3.22
- JK Lakshmi CEMENT 2.46JP POWER 1.63
- K E C International Ltd 1.7
- KOTAK MAHINDRA BANK 1.95
- L&T 16.9
- LAXMI VILAS BANK 1.71
- LIC Housing Finance 40.3
- LT 16.92
- LUPIN 2.42
- MARUTI 6.8
- MIDHANI 6.58
- MOIL 7.12
- MRPL 1.3
- MSTC 9.98
- MTNL 14.56
- NALCO 5.27
- NEW INDIA ASSURANCE 8.6
- NMDC 12.8
- NSE 12.51
- NTPC 10.83
- ONGC 9.48
- ORACLE FIN SERV 2.12
- ORCHID PHARMA 2.69
- PARIMAL ENT 7.46
- PEDILITE INDUSTRIES 2.95
- PNB 7.3
- POWER GRID c 4.89
- Punjab And Sindh bank 7.4
- RCF 2.2
- REC 2.78
- RELIANCE 6.78
- RVNL 1.94
- SAIL 9.6
- SBI 9.25
- SOUTH INDIAN BANK 3.22
- SUN PHARMA 5.88
- SUZLON ENERGY 1.69
- TATA STEEL 9
- TCS 3.98
- THE KARNATKA BANK 4.97
- TIDE WATER OIL 4.2
- TVS MOTOR 1.7
- UCO BANK 3.07
- ULTRA TECH CEMENT 4.06
- UNION BANK OF INDIA 6.4
- UPL 4.17
- VEDANTA 6.39
- VIDEOCON 4.56
- WIPRO 4.81
Dividend is another from of returns from invested stocks. Dividend refers to a reward, cash or otherwise, that a company gives to its shareholders. LIC earns around 1.5+ lakhs crores income from dividends, interest and other sources.
EPF Invests in Nifty and Sensex Index
The Employees’ Provident Fund Organization (EPFO) invests in Exchange Traded Funds (ETFs) based on Nifty 50, Sensex, Central Public Sector Enterprises (CPSEs) and Bharat 22 Indices. The EPFO does not invest in shares and equities of individual companies. Recently EPFO to allocate equity investments 75% in Nifty and 25% in Sensex.
So both LIC and EPF invests in equities to get better returns from investment. LIC invests your premium in Nifty stocks. EPF invests your monthly PF contribution to Nifty index. Whether you invested in Nifty Index or not, your money invested in Nifty index. But you are not getting the actual returns from your investment. You would get 2% – 6% from LIC insurance and 8% from EPF(after TDS). Nifty Index gives 11% in long term. You can read the valuable article in ET on how 1 lakhs to 4 crores in 40 years in nifty funds.
You can start with monthly 100 rupees in Nifty index funds. Everyone has 2 financial goals in common. One is retirement and another one is children’s higher education. You can start investing 2,500 rupees in Nifty 50 fund and 2,500 rupees in Nifty Next 50 fund for long term investment. It is beginning on your investment. You can start investing more than 5,000 rupees based on your financial goals. You can diversify by investing in blue-chip funds, small cap and mid cap funds. In the blog, I highlighted the nifty index funds for long term investment.
How to start investing in Nifty funds:
Say”No” to Insurance. Get coverage of 1.35 crores instead of 27 lakhs.
Confused on selecting mutual funds? Select Passive mutual funds