Why you should invest in Gold Purchase Plans?
Indians
appetite for gold is unbelievable. It doesn’t matter to us if the price sky
rockets, or if the Government imposes a ban or even if gold suddenly starts to
bite us! We need gold to survive. The price of gold is amazingly higher than
anyone ever had expected. Yet, the demand for it isn’t waning. India
consumed 963.1 tonnes of gold in 2010, which is likely to increase to 1200 tons by 2020.
With prices
all set to go higher, middle class Indians are opting for a way to bypass this
irritant. The new found love in Gold Purchase Plans is a reflection of
this.
Gold Purchase Plans Explained
So how does
a Gold Purchase Plans actually work? There are two ways in which these
plans operate;
Typically,
for a customer who pays instalment for one year gets one month bonus. For
example if you invest Rs. 1000 for one year your fund adds up to Rs 12,000.
However, with one month bonus you get extra Rs. 1000 increasing your fund
amount to Rs. 13,000. For two years investment some jewellers offer two month
bonus.
At the end
of maturity, the customer can opt for either gold coin for the amount or go for
gold ornaments. If the customer chooses gold ornaments the jewellers discount
charges on designing.
2. Systematic
Gold Investment Plan: Some
companies offers to credit an equal amount of gold to the customer’s account at
the price prevailing when an instalment is paid. On maturity she can purchase
the gold in the form of gold coins or ornaments. This way she can bypass
increasing price of gold if she buys gold at a later date.
SIP method
helps to average the cost of gold over the year. This is very useful as
prices are going up. However, it also helps the customer to buy up gold when
the price comes down on a correction. At lower prices more gold is
purchased and at higher price fewer amount of gold is bought. This helps in
averaging the cost of your gold purchase.
Overall, SIP method helps gold investors in the same manner as it helps investors in
equities.
To Know the magic of compounding in SIP must watch this video;
How Customers and Jewellers’ Benefits from Gold Purchase Plans
These plans
are provided by jewellers to attract more customers and make them spend more,
even if the prices are high. However it is a win-win situation with both
the consumer and the jeweller gaining from the transaction.
Benefits to Customer
1. Rupee Cost
Averaging: For the customer Gold Purchase Plans works like a Systematic Investment Plan. Every month she can invest a part of her income into this plan. At
maturity she gets gold worth the price of money invested. The money gains
interest and jewellers also provide bonus for the investment. This makes it a
good investment plan in gold especially for those who cannot pay at one go.
2. Helps Low
Income Group to Invest in Gold: Considering
the fact that gold is very important to our lives and is embedded in the
cultural psyche of the Indians, most of us are forced to invest in gold. Thus, it forces people with limited income to purchase gold formarriages and other occasions. With Gold Purchase Plans people with low income
can slowly make a corpus and purchase gold.
Benefits to Jeweller
1. Increased Flow of Money: A jeweller
is benefited by having a regular flow of money every month. This helps the jeweller
to buy gold and build inventory. Before the maturity date the jeweller can make
use of the money invested for other investments or expenditure.
2. More
Customers More Sale: More customers are attracted to jewellers who
provide attractive Gold Purchase Plans. Furthermore, the prospect of buying
lump sum gold through small systematic investments can make customer purchase
more than they would have otherwise. All this contributes to the overall sale
to rise thus profiting the jeweller.
Conclusion
Gold
Purchase Plans are a good investment. Gold is now not only a
hedge against inflation but is fast turning in to a safe investment asset. This makes it worthwhile to invest in gold in any form.
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