Manish Chauhan wrote about gold saving schemes recently and he briefly mentioned Tanishq Gold Harvest scheme in his article and I thought this was an interesting product.
Main Benefit of a Gold Savings Scheme
In the past when I’ve heard about gold savings schemes from jewelers, the primary benefit is that they allow you to save up monthly and build a substantial sum over a period of time, and they also allow you to lock in to the gold price that is prevailing at the time of your installment.
So, if you started the scheme today, they would lock down today’s rate at least for the amount of the installment you pay. This has been useful in the past with gold’s steady march upwards, and is a good thing for people who know they will need to buy jewelry at a certain date.
Tanishq Gold Harvest Scheme Key Benefit
The Tanishq Gold Harvest Scheme differs from these other type of schemes in that sense because they don’t lock down a price for you but instead sell you the jewelry at the rate prevailing at the end of the scheme.
Why lock down your money with them at all then?
The benefit of this scheme is that they give you a discount of sorts, where you pay 11 installments, and then Tanishq pays the 12th installment for you. I’ve seen some articles use the simple interest calculation but that’s not the correct way to calculate the return on this. You need to use IRR to calculate the return as BasuNivesh has rightly done, and I see that the annualized return on this type of this is about 19%.
This is a really good return, and you won’t find a similar rate in recurring deposits which to me is the comparable product.
So, if you knew you wanted to buy gold jewelry from Tanishq in the future, I would say this is a handy scheme and that’s perhaps the reason it has 15 lakh customers already.
Disadvantages of Tanishq Gold Harvest Scheme
The disadvantages of this scheme are fairly obvious too.
You are locked in with Tanishq, and can’t buy jewelry from anywhere else; you get the rate of a later date even though you are paying money in advance.
You don’t have the option of stopping the scheme mid way and take your money back once you start the scheme, you have to complete it and then buy the jewelry.
Who is this scheme suitable for?
Thinking of all these factors, I think the Tanishq Gold Harvest Scheme is ideal for people who are planning to buy gold from Tanishq in the future anyway. Save a little every month, and take advantage of their bonus.
For people who want to buy gold jewelry in the future but don’t care if it is from Tanishq or others, I’d say this can still be a better option than a jeweler who lets you lock down on the day’s rate but that would depend on how much you think gold will appreciate in the next year.
For people who want to buy gold as an investment, I’ve never felt jewelry was a great option because of the making charges, and the loss you incur when you go to sell it back, and you should instead look for options to own gold coins or gold ETFs, e-Gold etc.