As the festive season approaches, jewelers may try to sell you on their “golden harvest” schemes, highlighting the benefits like a percentage off the final payment and timing it with discounts. However, these plans require careful evaluation.
These “golden harvest” savings plans, commonly offered by jewelers, allow customers to make regular monthly payments over a period, often 10 to 12 months. The jeweler promises to pay a specific percentage of the total scheme value at the end of the term, along with additional incentives like bonuses or discounts, to entice participation. While these plans may seem attractive, it’s crucial to consider the fine print and whether they truly align with your financial goals.
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Customers can utilize the accumulated funds, including the jeweler’s contribution, to purchase gold jewelry from the same store. These gold items may come in various forms, such as ornaments, coins, or other available options within the jeweler’s collection.
Consider this scenario: You have the flexibility to invest between Rs 5,000 to Rs 5 lakh per month for 10 months. In return, upon maturity of the scheme, the jeweler will provide you with a bonus equivalent to 55%, 65%, an75% of the monthly investment for 10, 11, and 12 months, respectively. For instance, if you choose to invest Rs lakh, the jeweler will pay you Rs 2.75 lakh (for 10 months), Rs 3.25 lakh (for 11 months), and Rs 3.75 lakh (for 12 months).
Although the amount may seem attractive, when you calculate the Internal Rate of Return (IRR), it turns out to be only 1 percent.
A modest one-year return of just 1%, which is hardly impressive. Yet, the jewelry shop aggressively promotes this investment opportunity, likely due to the lucrative profit margins it generates for their business.
