It is fundamentally impossible for investments that offer very high upsides to have assured returns. However, this proposal is often used to lure unsuspecting investors. And ignorant investors fall prey to such shallow promises.
The latest testimony to this is the fate of the assured return schemes offered by India's largest insurance company LIC back in the 1980s and 90s. As per reports the extent of losses in three schemes offered by LIC has the potential to bring back memories of the UTI scam of 2001. Promising fixed returns of around 11 to 12%, these plans are currently running a deficit of Rs 140 bn! The invested money is from 1.3 m investors. Hence, there is little doubt that the insurer's inability to deliver returns could dislodge investor confidence once again.
Agreed that the notional losses could be attributed to trends in economy, interest rates, inflation and the like. Further, the outcome may not be as detrimental. This is because LIC seems to have enough liquidity at its disposal to tide over the crisis. But the economic factors are bound to have an impact on investments. And in no way can issuers of the instruments or investors undermine them. Hence it is most imperative for investors to recognize and be warned of the risks to the promised returns.
Investments in stocks at attractive valuations or in mutual funds through the SIP route can offer you some degree of safety. It could also enhance the likelihood of generating supernormal returns in the long run. However, there can never be any 'certainty' to the returns. And thus the promises to deliver assured returns need to be taken with a pinch of salt.
The latest testimony to this is the fate of the assured return schemes offered by India's largest insurance company LIC back in the 1980s and 90s. As per reports the extent of losses in three schemes offered by LIC has the potential to bring back memories of the UTI scam of 2001. Promising fixed returns of around 11 to 12%, these plans are currently running a deficit of Rs 140 bn! The invested money is from 1.3 m investors. Hence, there is little doubt that the insurer's inability to deliver returns could dislodge investor confidence once again.
Agreed that the notional losses could be attributed to trends in economy, interest rates, inflation and the like. Further, the outcome may not be as detrimental. This is because LIC seems to have enough liquidity at its disposal to tide over the crisis. But the economic factors are bound to have an impact on investments. And in no way can issuers of the instruments or investors undermine them. Hence it is most imperative for investors to recognize and be warned of the risks to the promised returns.
Investments in stocks at attractive valuations or in mutual funds through the SIP route can offer you some degree of safety. It could also enhance the likelihood of generating supernormal returns in the long run. However, there can never be any 'certainty' to the returns. And thus the promises to deliver assured returns need to be taken with a pinch of salt.
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