LiC collects money from the small saver. It pays commission ranging from 4% to 40% based on the product that it has sold, the remaining money gets invested.
Where does it invest? Well to keep the people happy it invests in Secured Government Securities. Chuckle chuckle who decides the price? Government of India! Does LIC have a choice of how much to buy and at what rate? Of course, theoretically.
Then it invests in shares of companies owned and managed by the government. Theoretically these are companies which have an independent board (some sadistic people think otherwise), takes business decisions (like NTPC spending Rs. 5 crores on advertising Indira Gandhi’s contribution to the nation), does independent product pricing (a Fortune 500 company that makes LOSSES when oil prices GO up).
Forget the sarcasm, come to reality. Will LIC be in a position to sell 10% of its holdings in the market without scaring the daylights out of the market? If a Cairn energy said ‘give me 10% of Ongc, here is a premium, will it be able to do so?’ No. Forget 10% of Ongc will the babu ‘allow’ a sale of 10% of ITC to a buyer who wants to take control along with BAT? No. The babus at ITC know how to stall such a request, do they not?
Now in such a well managed portfolio what returns should you expect to get?
Returns? You got to be joking.
People buy LiC policies to save TAX. Lic sells policies for the following:
a) to encourage thrift
b) to create infrastructure in the country
c) to create employment for 2 million agents, 200,000 employees, 20,000 vendors, ….et al.
d) if there is a surplus after this declare a bonus.
Post Footer automatically generated by Add Post Footer Plugin for wordpress.