Decoded: Should you invest in gold schemes that offer monthly instalment

Consumers must proper check retailers before investing in such schemes

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Gold saving schemes allow customers to purchase jewellery by paying fixed monthly instalments over a set period, typically 12 months. At the end of the tenure, a customer can buy jewellery worth the total amount invested, plus an additional bonus instalment paid by the jeweller. While these schemes provide an affordable way to buy gold, are they totally safe?

 

Pros of gold saving schemes

Affordability: The ability to pay in instalments makes it easier for people to purchase gold jewellery, especially for important occasions like weddings.

 

Bonus instalment: Many schemes offer an extra instalment paid by the jeweller, effectively increasing the value of the investment. For example, paying 11 instalments and getting the 12th one free.

 

Flexibility: Some schemes allow flexible payment options, where customers can pay according to their convenience, as long as the minimum monthly amount is met.

 

Cons of gold saving schemes

 

Limited to one jeweller: Customers have to buy jewellery from the same jeweller offering the scheme and cannot purchase from elsewhere.

 

No cash refund: The invested amount cannot be withdrawn as cash and can only be used to buy jewellery.

 

There may be some undisclosed details of the scheme that investors may not be aware of before investing

 

“Investing in gold through a monthly instalment scheme can be a prudent decision, offering a disciplined approach to building wealth. By committing to regular payments, individuals can accumulate gold steadily, reducing the impact of market volatility. This strategy allows for dollar-cost averaging, mitigating the risk of timing the market. Moreover, gold has historically served as a hedge against inflation and currency fluctuations, providing a safeguard for your savings,” said Rohit Garg, co-founder and chief executive officer at Olyv, an authorised financial services company.

 

“However, it's essential to consider the associated costs, such as interest charges and storage fees, and evaluate whether the scheme aligns with your financial goals and risk tolerance,” he said.

 

Key points know to before investing in such schemes:

 

The jeweller's track record and financial stability

 

Clarity on gold purity and making charges

 

Flexibility in case of missed instalments.

 

Options for premature withdrawal.

 

Any hidden fees or charges.

 

Alternatives you can  consider

 

Digital gold: Investments allow buying and selling gold online at market prices without the need for physical possession. It offers better liquidity and flexibility compared to gold saving schemes.

 

Gold ETFs and mutual funds: These investment options track the price of gold and provide exposure to the metal without the need for physical storage. They offer better returns and liquidity than gold saving schemes.