For centuries, gold has remained a precious and treasured commodity. If you plan to shower its splendour and glitter at your daughter’s wedding, here’s an opportunity.
Gold accumulation schemes offered by jewellers are an easy investment opportunity you can cash in on.
Jewellers like Tanishq (promoted by the Tatas) and PN Gadgil Jewellers offer schemes — similar to recurring deposit schemes offered by banks and the India Post — that allow you to save small amounts for different tenures. At the end of the term, you can buy gold jewellery of your choice worth the accumulated amount.
However, under these schemes cash refund is not allowed. Many local jewellers also offer such plans.
Most schemes allow a minimum investment of Rs 500 a month and in multiples of it. While Tanishq offers 12-month and 18-month tenures, PN Gadgil runs three schemes for one-, two- and three-year terms.
For a 12-month scheme offered by Tanishq, the investor pays only 11 monthly installments, while the jeweller pays the last installment. Similarly, in case of the 18-month plan, the investor pays for 17 months.
PN Gadgil also offers to pay one month’s installment for a one-year plan. “That’s a bonus,” said Rajesh Soni, store manager, PN Gadgil Jewellers, Pune. “However, the long-term plans are more beneficial for the customer. We pay three months and seven months’ installments for 2-year and 3-year schemes, respectively.”
On maturity, the investor can buy gold or silver ornaments of one’s choice. Tanishq allows 22 karat pure gold and 18 karat diamond-studded and platinum jewellery. However, gold and silver coins are not on offer.
The investor also has the option to increase or decrease the monthly installments according to his capacity. But, the maturity date is postponed if you fail to pay your installments on time by as many days you have delayed. If you need cash and withdraw early from the scheme, you may have to forego the bonus.
For those who are left with a decent surplus following monthly investments and expenses, such schemes may be a good option to diversify their portfolio and save a little extra, said investment experts. However, they do not recommend such plans as a core-investment avenue.
D Sundarajan, chief executive officer, Trendy Investments said, “Such schemes run too many risks for a retail investor. Jewellery business is not regulated, so it cannot guarantee safety of the money. Also, with a local jeweller the investor runs the risk of defaulting.”
Another important point is gold price movement. Abhinav Angirish of investonline.in said, “How would you know where gold will be trading when the tenure ends? When you start it could be at 16,000 and by the time the tenure is over, it could have moved way higher.” Higher price will mean a small buy and as these schemes don’t refund cash, you could be caught between the rock and the hard place.
Radhika Gupta, co-founder, Forefront Capital said, “You are locking your money in an illiquid option and one year is not a short period.”
The rate of return on these schemes is around 8-9 per cent. Bank recurring deposit schemes offer a lower 6 per cent rate but are a safer bet. ICICI Bank offers 6 per cent for deposits of upto one year and HDFC Bank offers 5.75 per cent. Banks also offer 6-month recurring deposit schemes, so in case of an urgent need, you have the option of withdrawing the cash.
Experts say systematic investment plans (SIP) offered by mutual funds are also a fine option. Value Research, a mutual fund rating agency, data reveals equity diversified funds have given a little over 82 per cent on an average in the last one year. A monthly investment of Rs 2,000 for a year would give Rs 43,680.
Gold exhange -traded funds are also an option to invest. These units can be redeemed for physical gold.
“If someone wants to have gold in his portfolio, buy a gold exchange-traded fund (ETF) on a monthly basis. You can buy as little as one gram also,” said Sundarajan. And, later these units can be redeemed for physical gold.
These schemes may come handy for those who have an occasion coming up, for which they may not be able to cough up a big amount at one go. “But even then, it would be better to invest small portions,” said Gupta.
