Greetings,
It’s the
SEASON OF FESTIVALS and of course, the season for the Women's Best friend, GOLD!! WE INDIANS LOVE GOLD!
Gold is very close to women and has a huge sentimental value and
an emotional attachment.
One of the
most popular ways of buying Gold
which even a common middle-class family is looking for is a GOLD CHIT FUND.
Under this Gold Chit fund, you need
to pay a Fixed Sum of amount for 11 months and at the end of the 11th month,
you are given the 12th-month instalment FREE by the Jeweller and as a Bonus
offering, many also offer you Gold Jewellery with ZERO WASTAGE CHARGES.
In short,
these schemes are EMI in Reverse. They help you buy Jewellery at a Future date
by saving and accumulating.
The
brochures show returns ranging from 10% to as high as 24% per annum.
Does sound
good. Isn’t it?
Or is it?
Let’s find
out...
SOME OF
THE MOST POPULAR GOLD CHIT SCHEMES ARE
Tanishq Gold Harvest Scheme
GRT Golden Eleven Flexi Scheme
Bhima Gold Tree Purchase Plan
Kalyan Dhan Samriddhi Scheme
PROs:
1. Discount
on Wastage. In fact, some jewellers offer ZERO WASTAGE CHARGES (Sadly, these
ZERO wastages is only for a few select designs and for good intricate designs, the jeweller could still slam a higher levy).
2. Allows a
simple effective way of accumulating large sums of money needed for Gold Purchase (like a
monthly SIP in mutual funds)
CONS:
1. These
schemes do not have any Regulation and thus if the Jeweller goes bankrupt, your
money is GONE!
2. You HAVE
to compulsorily buy Jewellery even if the Jeweller does not have designs of
your liking and also you will have to pay Making charges, etc.
The designs
may not be of your liking but you are now STUCK
3. The Gold Savings scheme by
Jewellers does not have SEBI approval and thus there is no monitoring of the cash you
pay. These Jewellers may be using your fund for Working Capital, business, etc
and nobody checks their books. So, if tomorrow, suddenly Gold price crashes and
all Investors stop their instalments and ask for Gold, then you never know how many of these
Jewellers would be able to keep their word.
4. Very few
Jewellers offer 24 Karat Gold.
Almost every jeweller offers only 22k gold. So, since you will not get cash from the
Jeweller, you are buying Gold
which is not 100% pure.
5. If at the
end of the Instalment period, you are in need of Cash for an emergency, you won’t
be able to use this money as you are given only Jewellery. The best you can do
is to sell the piece of Jewellery and forgo the making charges.
NOTABLE
POINT:
Some
Jewellers offer the choice of blocking grams of Gold when each monthly instalment is paid or the
normal method of Amount Accumulation.
At the time
of Maturity (redemption), you can choose which route works best for you (grams
or amount route)
Our view is
that:
In times of
Rising Gold prices,
grams work better and in times of Falling Gold prices, the amount accumulated works best.
ALSO, KEEP IN MIND:
Some
jewellers like GRT do allow the purchase of GOLD COINS.
These
schemes make sense only if you have a PLANNED jewellery purchase which matches
the Maturity Month of the scheme. If you don’t have any plans to buy jewellery, don’t
even look at these schemes.
And also,
you can go ahead and subscribe to this Gold Chit fund only if you are comfortable with
the fact that you have to buy Jewellery only from that particular shop.
MOST
IMPORTANT:
If you do
decide to go ahead with taking a Gold Chit, make sure you go with reputed Jewellers as many
Fly-By-Night Operators have vanished after collecting crores of rupees (VGN
Jewellers, etc)
Jewellers
like Tanishq, and GRT have a good
reputation.
And of
course, as we always keep saying, GOLD IS NOT FOR RETURNS. There are many better options for
Investments which are superior to Gold when it comes to Returns.
You can also
consider other options like the Gold Mutual Funds and the best of them all namely SGB.
SGB is Sovereign
Gold Bonds. SGB gives 2.5% interest with a 5-year lock-in period.
And SGB is
backed by 24k Pure Gold.
But, Sir, the 12th-month
instalment is FREE. What about that?
Well,
Jewellers are not here for charity, they give FREE last instalment with money
made from your previous instalments!
Jewellers
not only earn interest on the buyer's instalment but also sell the jewellery
after earning a handsome margin. For 20 grams of gold jewellery, he earns Rs 600 making charge and
sells 22-carat gold
at a rate of 24 carat gold.
So, he earns approx. 8% extra by selling gold of 22-carat purity.
For jewellers,
this scheme is a win-win situation as he gets the chance to sell their product,
and at the same time, he earns interest on the customer’s instalment.
For lower middle-class
people, and for people who want to accumulate Gold for marriage or other purposes in near
future, the Jeweller Gold
Saving Scheme looks okay, but for all other purposes, the SOVERIGN GOLD BOND by the
Government of India is the BEST.
THE BIGGEST ATTRACTION
for me is that this SGB gives me Interest of 2.5% every year (on base value)
and mirrors the prices of the Market Value of Gold.
Neither Gold Chit Funds, Physical
Gold, Gold Mutual Funds or Gold ETFs pay any
Interest.
For a Gold
lover, SGB is a GOD-SENT WINDOW to invest in Gold (especially as it is GST-free too!!)
If you are
hell-bent on investing in these schemes of Jewellers, then I feel that Tanishq
and GRT are better
among the Worst.
ANOTHER
POINT TO NOTE:
Most
investors invest in Bank Recurring Deposits to buy Gold at a future date. This is not a good
idea since Interest Rates may not keep pace with the rise in Gold prices and they will
not be able to achieve their objective.
FINAL WORD:
Gold Jewellery Schemes aim to give you Gold/Jewellery whereas gold Savings Funds/Gold ETFs aim to give you
Cash.
So, if you
want to buy Jewellery in the near future (say 1 year), then go for Jewellery Gold Savings Schemes, but
if you want to buy Gold
as an Investment or if your Gold
usage is at a later date (say your daughter's marriage, which is several years
away), then it's Gold
Savings Fund/Gold
ETF blindly.
The caveat, if
it is for consumption, then unless you have a very trusted and reliable
Jeweller (ready to buy back from you), don’t think of these Gold Savings Schemes by
Jewellery Stores.
Buy Gold ETF, Sell the Units
when you want gold and from the money you get, go buy gold!
SPECIAL
TIP ONLY FOR OUR READERS:
If you do
have a Gold Chit
fund, when you go to the Jeweller at the time of maturity (redemption) DO NOT
reveal that you have a Gold
Chit scheme, first select the Jewellery you want, get the estimated Bill and
only after this REVEAL that you have a Gold Scheme!!
All the Very
Best,
Srikanth
Matrubai
Author: DON’T
RETIRE RICH
&
WEALTH OF
WISDOM (WOW)
All the best,
Regards,
Srikanth Matrubai
https://t.me/joinchat/AAAAAELl4KUnaJzi-JJlDg/
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