I’ve had a lot of readers ask me to take a look at this.
This one’s all about gold, gold, gold.
KaratBars International claims to be the only company of its kind doing what they’re doing. They may well be right and thank goodness for that – it’s a terrible business opportunity.
Set up in 2011, they focus in the trade of gold ingots and various gift items that incorporate gold ingots. These are usually in the form of real gold set into a wallet-friendly plastic card.
We’ll look at just how ‘friendly’ these cards are in just a moment, but first a little background…
The man behind KaratBars International is Harald Seiz. He markets his products worldwide in over 70 countries and says that his company’s vision is to ‘contribute to the financial security of each and in every country world-wide’. A bold claim.
Let’s pray that he never becomes head of the IMF.
How does it work? (and what makes Karatbars ‘unique’?)
Any gold you are sold through the company is called a ‘Karatbar’. You can buy them one gram at a time (in 1, 2.5 and 5-gram cards).
Their big USP is this…
You can buy gold from them in small amounts (in grams, rather than ounces or pounds) making it, they claim, affordable for anyone.
They also claim that their gold is of the highest quality (not the stuff you find on the back of chocolate coins presumably) and promise that ‘The refineries are LBMA certified which guarantees purity and weight of the gold. Made of pure 999.9 24K fine gold that is recognized as real currency.”
Sounds pretty plausible so far, but are they good value for money?
No, no, no, no. No. A quick calculation reveals that the rate you pay per ounce is VASTLY overpriced.
Let’s do the maths.
1oz Krugerrand gold coin costs around £800 (at the time of writing)
1oz worth of Karatbars (28.34 grams) costs around £1,120 (at the time of writing)
In other words, the same amount of gold would cost you over £300 more (and I’ve been generous with the conversions here).
Yes you can buy Karatbars in smaller amounts but why on earth would you want to when you’re paying nearly 30% more?
Go online and you’ll find dozens of websites created by KaratBars Intetnational members spitting out the same old spiel – pretty much word for word. They claim that you shouldn’t compare like for like but then they all have a vested interest in saying that.
Here’s where things take a turn for the worse…
The more immediate money-making side of the ‘Karatbars’ business is essentially a multi-level marketing scheme.
I make no bones about it in Insider’s Edge – I don’t like MLM schemes. There are a handful of ‘genuine’ ones knocking about but in my experience even these are best avoided. The focus should always be on the product or service, not on how many people you can sign up.
With KaratBars the idea is that you ‘get paid weekly and monthly by a 7-streams income compensation plan… Each new sign-up, everyday, will go in your left leg.’
So, there’s selling involved via an affiliate system to promote the gold. You’re paid to promote KaratBar’s products.
I should point out at that KaratBar International desperately tries to distance itself from being called a ‘network marketing company’. They claim that ‘among the characteristics that makes us not exactly a MLM (multi-level marketing) is the fact that no purchase is required every month to stay active (auto-ship).’
Hmmm, heard that one before.
In order to make any immediate profit from this, beyond the investment in the small amounts of gold, you’re going to have to stay active. If not, you don’t receive your commissions – be they in the form of the ‘auto-save’ gold, or otherwise.
This means you’ll have to become a massive pub-bore and start pushing the product on anyone that’ll listen, in order to hit your targets and bank your commissions.
Here’s a breakdown of the packages on offer:
The bronze package doesn’t actually secure you any gold, but it gives you vouchers to use against gold and a 5% of personal commissions (on packages, gold and products).
The silver package gives you a 1g KaratBars Gold Card and 10% of personal commissions.
The gold package gets you 2g of gold, more of what’s included in the other two packages, as well as 15% of personal commissions.
The VIP package gets you all of the above, but 3g of gold and 20% of personal commissions.
No prizes for guessing which package they want you to sign up to.
To earn money from this, the idea is meant to be as simple as signing up, buying a package, and finding two more people to do the same.
In other words, this is unashamed MLM territory – no matter how they dress it up.
If you want to invest in gold AVOID Karatbars, there are much better alternatives
Yes, you can buy smaller quantities of gold from Karatbars International, but gram for gram you are getting a terrible deal.
If you’re serious about investing in gold you need to think longer term and invest in companies who can offer you gold at the most competitive prices and in the most saleable format.
For smaller investors that format is most likely to be gold coins NOT tiny slivers of gold tacked onto plastic cards (funnily enough).
Tempting as it might be to buy smaller amounts of gold remember you’ll need to be able to sell it on and to do this you want the most widely accessible format possible.
The other important thing to note is this. You don’t have to physically store gold yourself to invest. In fact unless you’ve got a particularly bulletproof mattress you’d be advised not to.
If you are looking to invest in gold then you’re better off taking a look at one of these companies instead: Baird, ATS Bullion, Chards, GoldCore, Bullionvault.
Yes, KaratBars International is undeniably based on a unique and sound premise – investing in gold in affordable quantities – but the figures simply don’t add up.