Reliance Money/ Reliance Capital, through its Relaince Money Precious Metals company, has come out with another gold based investment scheme. Reliance is a big name trusted by many specially in India and their investment arm is not leaving any possibility to capitalize on that brand name. Reliance already has a lot of gold based schemes, namely Reliance Gold Savings Plan and Reliance Gold ETF, and this is another ariant of the same gold based investment scheme which is now available to small investors.
In this article, lets take a closer look at the Reliance My Gold Plan and see whether this offers anything different from exisitng gold based investment plans and whether it is really worth investing in such a gold based scheme.
What is so unique about Reliance My Gold Plan?:
Reliance My Gold Plan basic scheme is that it will collect money from investors at the start of the month as a lump sum amount, and then divide that money into 20 equal amounts and then in the 20 business days of the month it will invest these small parts - i.e. one of the 20 parts every day.
So for e.g. you gie them 1000 Rs. per month. Divide it by 20 and it gives 50 Rs. In next 20 business days of the month, they will buy whatever gold will be available for that 50 Rs.
So if on day 1, gold is at 30,000 Rs. per 10 grams, then for 50 Rs. you will get 0.01667 grams of gold. day 2, if the gold price goes to Rs. 32,000, then for your 50 Rs. you will get 0.015625 grams of gold on day 2.
This will continue for all 20 days of the month and your gold amount will therefore average out for the price of gold over 20 days in that month.
This will continue for your selected amount of monthly investment. And this is the unique feature about this Reliance My Gold Plan. It claims to benefit small investors in this scheme, so that these small amounts of money will be used for average gold purchase and hence over a long period of time investors are expected to accumulate gold at the average price. Sounds good? But hold on till you read full details and charges...
Reliance My Gold Plan Details & Investment Advice
What are the scheme details for investing in Reliance My Gold Plan?You will be required to start with a initial amount (Minimum Rs. 1000 & multiples of Rs. 100 thereafter) and then commit a monthly investment amount (again Minimum Rs. 1000 & multiples of Rs. 100 thereafter).
The selected duration of investment can be from 1 year to 15 years (intervals of 1 year i.e. 1 or 2 or 3 years and so on).
There is a lock-in period of 6 months.
Amount invested on daily basis will be for 24 carat gold daily price in grams (4 decimal places).
After your complete your selected tenure of investment, you will have to take gold coins or gold jewellery for the amount of gold you accumulated. Say for example you decide to invest for a period of 10 years and after 10 years you accumulated 100 grams of gold, you can then take 100 grams of gold coins or jewellery, on maturity.
What are the charges for investing in Reliance My Gold Plan?
And this is where it gets interesting - every investor for all investment schemes should be aware about the charges.
Reliance My Gold Plan will take 1.5% in the name of administratie charges. Administrative Charge charged on MY GOLD PLAN price instead of the Subscription amount. My understanding is that this will mean everyday, if your daily amount comes to 50 Rs., then only 49.25 Rs. will be invested, rest 0.75 Rs. will be kept by Reliance Fund Managers in the name of Admin charges. (In case this is incorrect, please post correct details in the comments section)
This is a permanent fee you will be bound to pay irrespective of your period of investment.
Also note, if you withdraw from this scheme in less than 1 year, then 2.5% charges will be taken away for termination.
Even if you complete your investment tenure (say 10 years) but dont take gold coins or jewellery, then Reliance will take 0.5% of the amount per year towards "safekeeping of your gold and insurance charges".
If you decide to take gold coins or jewellery upon maturity, then you will still have to pay coin making charges. Nothing is mentioned about the jewellery making charges. However, Local taxes, octroi taxes, etc. may still have to be paid by the investors on maturity.
Investors should be aware about these details.
What are the benefits of Reliance My Gold Plan?
Well, it claims to provide "Daily Averaging benefit" for investing in gold with small amounts to small investors.
That is one claimed benefit.
They claim zero default risk as an independent trustee retains your gold, plus the purity of gold is guaranteed.
What are the risks in investing in Reliance My Gold Plan?
Some details investors should be aware of :
- Risk of Gold price fluctuations. Although they claim to average out the gold accumulation price over a period of time, but the risk of gold price falling down at the time of your scheme maturity always exists. Also note that averaging does provide some downward risk cover, but it also limits the upside profit potential.
- This is not a collective investment scheme, so it does not come under SEBI rules and regulations
- This is not a deposit scheme, so it does not come under RBI rules and regulations.
Therefore, the only way to address customer griviences is the customer can approach the independent Security Trustee of this scheme.
Here is a comparison as available on Reliance My Gold Plan scheme: (taken as screenshot from the site) Please click to enlarge:
These kinds of schemes appear to be good accumulators, but please note the risks mentioned above.
All these schemes are offering is a disciplined approach to regular investment in gold. However, this comes at a cost in the form of administration fee, etc.
These schemes do not guarantee any benefits or returns, rather simple accumulation at whatever prices gold is available at.
Here are the details of Historical Performace of Gold ETF in India with comparisons across many schemes
So, as an investor, if you are OK to pay the admin charges, take delivery of physical gold at the maturity of the scheme, plus pay the manufacturing charges as applicable, plus the local taxes etc as applicable, then this kind of scheme should be good for you.
But if you are looking only at investment in gold, then I'll suggest to go for Gold based ETF's or Gold Exchange Traded funds where a lot of them are available in Indian markets. Some also come with monthly SIP.
- All Gold ETF's
- All Gold Saving Funds
Daily price fluctuations of gold prices may be there, but monthly price fluctuations are not that big. Daily averaging shouldn't give that much extra benefit in long durations compared to monthly SIP Gold ETF monthly averaging.
The best thing about gold ETF's is that upon selling the units you get cash, and that you can use anywhere - buying gold coins, jewellery or anything else. This My Gold plan restricts the investor to only taking physical gold.
Axis Gold Fund, then the ICICI Gold Savings Fund, SBI Gold Fund and Reliance Gold Savings Fund (See Review & Details) are there in the market.
HDFC has its own ETF: HDFC Gold ETF NFO: Review Analysis & Details apart from others like Quantum Gold Fund (Gold ETF) ICICI Prudential Gold ETF, then SBI GETS-SBI Gold ETF NFO Review: SBI Gold Exchange Traded Scheme and so on.
Other Gold Schemes: Quantum Gold Fund & Religare Gold Fund
Ultimately, it all depends upon your investment horizon, charges taken by other similar schemes or gold saving plans or gold ETFs trading charges.
Reliance My Gold Plan
1 comment:
hi im karthik
there is no benefit in this RMGP .. wast of money investing in this .. People who r investing in this are paying higher value than market price ,.. and more for their maintenance .. wast of invest .. no return value ...
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