Tanishq Gold Harvest Scheme Review

by Manshu on May 23, 2013

in Gold

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.

{ 15 comments… read them below or add one }

Paresh May 23, 2013 at 8:27 am

What is beneficial if there is no price volatility benefit and no regulatory control over making charges.

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Manshu May 23, 2013 at 8:25 pm

I guess the main benefit is the free installment but if you don’t want to incur their making charges then better stay away from it.

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Anand May 23, 2013 at 8:52 am

Hi Manshu,

I have heard that the price of gold in Tanishq is higher than the market rate. That might be one another thing to consider. Can you or someone check on that and update please?

Thanks

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harineem May 23, 2013 at 12:09 pm

I used to think Gold ETFs are better option till Gold crashed. At least with jewellery you have something to show or can be put to use on occasions. This is an intangible benefit which no financial adviser seems to take into account.
With ETF you are just sitting on loss.

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Manshu May 23, 2013 at 8:21 pm

The trouble with that is at least in my opinion that an asset should be readily convertible to cash and with jewelry that’s not the case. I don’t consider jewelry as part of any net worth calculation I do.

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harineem May 24, 2013 at 9:44 am

No Fixed asset is easily convertible like land. With jewellery at least you have the various gold loan schemes.

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Manshu May 24, 2013 at 9:47 am

Yeah you are right, which is why I feel that even residential house should not be part of calculating how much money you have, like I have some spreadsheets to calculate net-worth but things like house, car, jewelry etc. which have some meaningful value are not part of it.

This approach is harsh on you in the sense that when you take a loan for any of these the loan amount is shown as a liability but when the loan is paid off that same thing is not shown as an asset. But I still do this at least for my own finances so I have a good truly liquid measure of how much money I have.

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harineem May 24, 2013 at 11:55 am

Sensible approach if you are not a heavy investor in Fixed assets because I know people who stay away from liquid assets like stocks and are completely into property, gold etc especially in South.

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indian thoughts May 23, 2013 at 1:21 pm

why should i use IRR in such a case?

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indian thoughts May 23, 2013 at 1:23 pm

Hi Manshu,

why should i use IRR in this case? i am not really sure about that.
And yes Anand, you are right Tanishq charges higher gold price as compared to market rate. 🙂

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Manshu May 23, 2013 at 8:16 pm

To calculate the return you need to use IRR since these are monthly cash flows and the first installment is there for 12 months but the last one for only one month, so anything else won’t work.

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Ashok May 23, 2013 at 11:16 pm

1. Can we buy gold coins from Tanishq at the end of the tenure? If yes, then it could be interesting for pure gold investors, like me.

2. Moneylife magazine had an interesting comment about this scheme ( in their cover-story about Saradha scam ), that there is no tax clarity on schemes like these. Essentially these are RD type schemes, which do not come under the purview of RBI, SEBI, or IRDA. A good magnet for parking black money.

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Hari May 25, 2013 at 12:09 am

last time i checked gold coins are not covered under this scheme. you are required to purchase jewellery from them. personally, did not find the same to be exciting considering the way gold prices was moving upwards over last three years or so.

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harineem May 24, 2013 at 11:52 am

Request Manshu’s and Shiv’s view on this article
http://www.firstpost.com/investing/gold-will-rise-against-usd-it-may-hit-a-new-high-by-2013-end-811511.html?utm_source=author_widget
He has some valid points but interested in hearing other side.

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Manshu May 24, 2013 at 9:44 pm

I feel it is a very sensationalist article and the goal of this guy is mostly to make money selling books and interviews and not so much actual investing in gold. Any time someone says paper gold or conspiracy or anything else like that I am turned away from that person. Too many gold bugs.

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