InvestorQ : What is a chit fund & good to invest?
Akansha Shivdasani made post

What is a chit fund & good to invest?

Rishita Das answered.
2 years ago
Well, the definition of a chit fund varies from person to person. For some people, it could be a loan or credit scheme or for others, it could be a saving *** investment scheme. This is a scheme where members or subscribers agree to contribute a fixed amount every month for a certain fixed period and the amount collected shall be auctioned every month and given as prize money to the needy subscriber.

In India there are three types of chit funds:
1.      Chit funds run by the government of India
2.      Private registered chit funds and
3.      Unregistered chit funds

Yes, it can be a good option to invest as –
a.       It gives the flexibility to save and borrow.
b.      You can borrow the money right after paying the first installment.
c.       The easiest way to get finance, as there’s no need to submit a lot of do***ents.
d.      The subscribed who does not receive the prize until the last installment may get some dividend, which would be comparatively higher than other deposit options.

However, the returns are not fixed under chit fund and risk involved is comparatively higher as there have been cases where the foreman ran away with the corpus amount.