Chit Funds

Never let your money sit idle, make it work harder than you do.

The concept of chit funds is indigenous to India and originated more than 1000 years ago. Initially it was in the form of an informal association of traders and households within communities, wherein the members contributed some money in return for an accumulated sum at the end of the tenure.

It is a mechanism that combines borrowing and savings in a single scheme. In a chit fund scheme , a group of individuals come together for a pre-determined time period and contribute to a common pool at regular intervals. Every month, up until the end of the tenure of the scheme, the collected pool of money is loaned out internally through a bidding mechanism to the most deserving member. This way, people who are in need of funds and those who want to save are able to meet their requirements.

Chit fund means to "save and borrow" simultaneously. It is considered one of the best instruments to cater to the needs of a customer. It enables people to convert their small savings into lump sums.

A chit is the only financial product that allows you to save and borrow. The rate of return generated by saving using a chit is much higher than what is offered by banks. The risk involved in saving using a chit would depend on the chit fund company. While parking your hard-earned money as a fixed deposit with a bank would entail no or negligible risk and similarly generate less returns, rotating your funds using a chit fund would entail low risk while generating 12-16% returns annually depending upon which month you lift the chit.

An intelligent investor is one who diversifies his risk portfolio. Entire disposable income or surplus income should not be invested in any one single financial product alone. Investments must be spread across various financial products like Insurance, Stocks, Mutual Funds, Bank Deposits and Chits.

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