In case you do not know about Saina Nehwal, she is an ace badminton player, former World no. 1, currently no. 2. She has represented and won for India in several tournaments and won the first Olympic medal for India as well. She is a sportsperson par excellence.
Recently, she gave an interview to Economic Times on her investment preferences and style. Here is a link to that interview.
I was shocked and devastated to read it.
Well, you might say it is none of my business as to how she invests money and probably you are right. But when the same is published in a national newspaper with wide reach and influence, I do tend to get worried.
My first worry starts at the sub text of the headline that says “Saina Nehwal advises savers to put their valued income in LIC or FDs as she finds these two are best options and are also hassle-free.”
Her personal investment style has been made to sound like a gospel for the general public. It is not.
Moreover, her investment style comes across as unthought of and random. I wonder who her investment advisor is!
I am taking up two big points she mentioned in the interview and help you (and hopefully her, if she reads this) see the truth.
Saina Nehwal invests in Bank FDs
Saina feels that Bank FDs are hassle free. No doubt about that. But for her income tax bracket, they are also one of the most inefficient investments in protecting the value of her money. She already loses so much to tax. Add the demon of inflation and what remains is virtually nothing.
She could easily look at liquid or ultra short term debt funds which will allow her to index her costs and pay lesser tax.
She may also subscribe to Tax-free bonds, which she says she has not invested in so far. That would give her far better tax efficient income.
And they all are equally hassle-free.
Gungho about LIC
Saina goes on to say that “this year I have gone for a huge investment – roughly over 10 million per year – in life insurance with LIC India for a continuous 16 year period. I found it a hassle-free investment. It will protect my life and will give a huge pension as a means of livelihood after I turn 40.”
LIC is charging a premium of Rs. 1 crore per year. Of course, we don’t know which product but it sounds like a pension plan since it will pay her a pension at the end of the tenure. Let’s assume that there will no growth in the amount she pays as premium. So at the end of 16 years, the value would be just Rs. 16 crores.
At an annuity rate of 8% (LIC can be real generous at times, you see), she will get about Rs. 11 lacs per month for the rest of her life. Mind you, she has invested the entire maturity value of her insurance policy into buying an annuity.
Yeah, as Saina mentions, that sounds like a huge “pension” in today’s terms on a monthly basis. But she forgets one thing. In 16 years and then from every year there on, inflation is going to make deep holes in this fixed amount. A rupee tomorrow is worth much less than a rupee today.
That insurance cover is a sham. It is an unnecessary cost on her policy which she can easily do away with.
Unfortunately, LIC has become her best hassle-free investment – one that comes at a huge cost.
The sad truth is that, the only one who benefits from this investment in LIC policy is LIC. It gets the premium money for the next 16 years and then gets to keep the maturity amount too in the name of providing annuity / pension.
And someone (someone) is earning a real fat commission every year for the next 16 years and after that on the pension annuity too, unless Saina Nehwal calls up an advisor to see through this sham.
Who advises Saina Nehwal to invest?
As I had mentioned her investments appear random and not thought through. Probably, she doesn’t have an investment advisor at all.
If there was one, we would get to read, most importantly, about her goals. It could be a new academy she would want to set up to train young ones in badminton, a social foundation to offer scholarships to the bright and needy, her own retirement (which has been mentioned in the passing) and a business venture (she mentions one).
Saina says the best investment advice she ever got was to invest in LIC or FDs. I start wondering who told her that. Not an investment advisor for sure.
She probably didn’t realise that not only she gave her hard earned money to LIC but she also advertised the company, for free.
Should you follow her advice?
NO! Please do not let celebrity wisdom bother you.
Work on your own personal investment style.
Meanwhile, if anyone knows her, here is a post that you can help her get her hands on.
10 Money basics you must never forget
Between you and me: What’s your take on this? Do you too believe LIC and FDs are the best investment options? Would you follow her advice?
I thank Dr. Harsh Purohit of Banasthali Vidyapeeth who shared the Saina Nehwal interview with me. That was the prompt to write this post.
Just curious, but what would you advise her to do? (With the limited information available to you about her goals). Clearly, she has very high income at the moment and no solid goals to plan for.
Maybe you could post a rough financial plan for her and maybe, just maybe, the media picks it up and she gets to reading it. 🙂
Thanks Fahd for the comment. More than advise I would need to tutor her a bit on money and investments. I personally feel that she has goals. She just hasn’t got the right coach for her money to structure it all right.
Your idea about doing a sample plan for her is great. But I would rather do it for you with more concrete details 😉 What say?
In this era of surrogate advertising where celebs get paid for everything they say, write or tweet, LIC may have used Sania as a brand ambassador… hmmm not an improbable idea . Just add that bit about Bank FDs to sound more credible. This technique is called as a placement ad, and is happening in movies and TV soaps since long.
I would agree. That’s highly likely.
FYI, Saina had in Sept 2015 become the brand ambassador of Edelweiss Financial Services. Either that deal fell apart, or there is some soup now to be taken care of.
Hi
I am an NRI and have some funds which will be needed after a few months.
What should I do.
If you need this money in the next few months, please keep it safe. No risk at all. Your options are Bank FD and or liquid funds. Thank you.
PS: US and Canada based NRIs are restricted from investments by several funds.
I wish she read this post.
I wish that too. 🙂