I was not sure whether to call these investment myths or investment myths, so decided to call them middle class myths!
1. LIC is a good investment: Most (if not all) bought LIC’s products as a method to defer or save Income tax. They did not think of life cover, returns, or anything else. In some cases the agent was a friend or a relative, so it was literally thrust on them.
Fact: LIC is a lousy investment product. If a person had invested this amount in the Sensex or even in PPF, he would have got a far superior return even after deducting the cost of a term insurance premium!!
My take: if the guy had taken a term and invested in a SIP he would have been better off, in most cases. However if he were to keep it in a bank account (which is what 98.5% of Indians do) he would have been better off buying a LIC policy! Please remember all the LIC returns came from the tax concession (the shareholder of LIC wanted the moolah, right)!!
But still ask the Government – they have really benefited by owning 100% of LIC!!
2. Rent vs. Buy: i have written about this too many times. Search and you shall find!!
3. Equity is risky in the long run – again written too may times…
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