SILVER ETF: A SILVER LINING IN INVESTMENT

Precious metals like gold and silver hold financial and emotional value for most Indians. Buying, holding and selling has become increasingly difficult. So, when paper gold in the form of Gold ETFs was launched, it was an effective way of transacting in the yellow metal without the trouble that comes with physical gold. Investors now have the option to invest in Silver ETF.

Mutual funds are ready to flood the market with silver exchange traded funds (ETFs) and silver fund-of-funds (FoFs).

At least half a dozen mutual fund houses are in the race to launch exchange traded funds and fund of funds based on silver; SEBI gave its go-ahead to silver ETFs in September 2021.

An ETF tracks an index, commodity or a sector which can be traded on a stock exchange just like shares. A fund-of-fund invests in some other mutual funds. In case of silver FoFs, these will invest in silver ETFs.

"Industrial demand for silver is huge and around 50% of silver mined globally is used in industrial applications and products. Thus, unlike gold which is considered as a pure hedge product, the prices of silver can get affected during economic crises, slowdowns and market falls especially when the industrial demand for silver is low or muted,".

Silver investment for huge returns?

Investors looking at trading in silver or expecting extraordinary returns from investments, may not like the idea of investment in ETF. “Returns from investing in silver ETF will be in line with the returns from investing in silver bars, minus the fees and the tracking error.”

Investing in silver is expected to reap better benefits than gold during recovery times. “Silver usually outperforms gold during economic recovery cycles in the longer run such as post-pandemic,”.

Why Invest in Silver?

·         Getting started to invest in silver is very easy. Physical forms of silver like coins can easily be purchased from banks and jewelers near you. For small size investors, this is a big boon.

·         Storage of physical silver is easy as well. You can buy silver jewelry and silver coins and store them at your home. There is no need to worry as you would when storing gold jewelry.

·         Silver is used a lot in industries around the world. In the year 2017, industries consumed 59% of the total silver produced. If you have any paper forms of silver investments with you, the future looks good for you. Since silver mcx price is determined mainly by the market, this is a trend that will help all silver investors.

·         Silver is relatively less risky. If you have invested in silver in the form of a portfolio, this is good news for you because silver will help to mitigate your portfolio’s risk. This is mainly because MCX silver’s prices don’t fluctuate in value too much.

·         There are many ways you can invest in silver. If you wish to go by the traditional route, buy silver bars, silver coins, and silver jewelry. Buy them and sell them when you need to. If you would rather not deal with physical silver, there are paper forms of silver too like silver futures, NSEL, ETF and many more.

SIP for as low as ₹100

Nippon Life India Asset Management, said investors can start Systematic Investment Plan of as low as ₹100 in silver FoFs; most broking firms facilitate SIP in ETFs.

What Makes Price of Silver Move?

Silver tends to be sensitive to interest rates, inflation, and energy prices, just like gold, though the sensitivity may vary.

Industrial activity, demand-supply forces worldwide, the movement of the rupee against the dollar, mining supply, and inflation are some of the prices determining factors.

Silver tends to play "follow the leader" behind gold with a small lag.

When it comes to investing in silver keep in mind that it moves every 6-8 years in spurts and makes big gains or losses.