- Date : 27/09/2022
- Read: 4 mins
Adding silver to your gold portfolio!
As you must already be aware, gold and silver are special in Indian households. Both are precious metals with great cultural and traditional significance. The demand for gold and silver is high, and their supply is also limited. But these metals have very different plans when it comes to investment. Indian AMCs are prompt to launch unique schemes and plans. Both gold and silver ETFs already exist in India. However, recently, Edelweiss Mutual Fund has launched a new scheme Edelweiss Gold and Silver FOF. It's a first-of-its-kind scheme that combines gold and silver ETFs in equal appropriation. You might wonder if gold is a better investment than silver. For those confused, gold and silver are combined into a single product.
Even though both gold and silver are precious metals, their economic value is very different. As you must be aware, gold is superior to silver. Also, history has repeatedly proved that gold has stood the test of time and proved to protect investors during inflation. Thus, gold is perceived as a safe asset that can help during various economic crises. The demand for gold in jewellery has been the main factor behind the price trends. But gold is not useful as a diversifier. This is because gold, in no way, is correlated to equities. Gold is mainly used for jewellery, but silver is used mainly in manufacturing solar panels, smartphones, etc. Silver, on the other hand, finds its use mostly in various industries.
Related: Want to invest in both gold and silver: Check out this new ETF by Edelweiss
Comparison of Gold and Silver prices
The prices for gold and silver are affected differently during different circumstances. Gold has returned 5.5% in the last decade, while silver has returned 0.7%. But a huge divergence has been observed between the price movements of the two. The Edelweiss Gold and Silver FOF plans to capture this divergence. And they plan to do that by providing equal allotment to gold and silver. No tactical calls would be taken for or against either of the metals depending solely upon the predominant trends in their valuation. If there is a sharp increase or decrease in the value of either metal that distorts the balance between them, the better performing one will be sold by the fund to retain consistency. This would result in profit booking without any tax liability for the investor. However, whether both metals are needed in the investor’s portfolio is a question that remains largely unanswered.
When compared to gold, silver has higher volatility besides being correlated with stocks. This makes silver less of a diversifier than gold. Experts believe that silver shows the same behaviour as other risk assets; thus, it doesn’t provide any added advantage if added to the portfolio. Both gold and silver, however, have an inverse correlation with the dollar. And this is exactly what could prove to be favourable for both metals. However, the value of the dollar is expected to weaken soon, which will lead to an increase in the price of precious metals in the upcoming years. But this can happen only with the normalisation of the excesses of liquidity impacts.
Related: 5 assets that you can liquidate quickly in case of an emergency
What should you do?
In the long term, gold will be useful for portfolio diversification. With silver, the returns may get a boost but at the cost of possible volatility. Experts in the field thus suggest investors treat both gold and silver as different investments. Adding silver to the product will not bring desired results if you intend to lower the volatility of silver associated with equities. Thus, if you wish to go for long-term investment, experts suggest investing in gold rather than a combination of gold and silver. Are you aware of these Short term investment options for high returns?
Gold or Silver: Which is Better
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.
As you must already be aware, gold and silver are special in Indian households. Both are precious metals with great cultural and traditional significance. The demand for gold and silver is high, and their supply is also limited. But these metals have very different plans when it comes to investment. Indian AMCs are prompt to launch unique schemes and plans. Both gold and silver ETFs already exist in India. However, recently, Edelweiss Mutual Fund has launched a new scheme Edelweiss Gold and Silver FOF. It's a first-of-its-kind scheme that combines gold and silver ETFs in equal appropriation. You might wonder if gold is a better investment than silver. For those confused, gold and silver are combined into a single product.
Even though both gold and silver are precious metals, their economic value is very different. As you must be aware, gold is superior to silver. Also, history has repeatedly proved that gold has stood the test of time and proved to protect investors during inflation. Thus, gold is perceived as a safe asset that can help during various economic crises. The demand for gold in jewellery has been the main factor behind the price trends. But gold is not useful as a diversifier. This is because gold, in no way, is correlated to equities. Gold is mainly used for jewellery, but silver is used mainly in manufacturing solar panels, smartphones, etc. Silver, on the other hand, finds its use mostly in various industries.
Related: Want to invest in both gold and silver: Check out this new ETF by Edelweiss
Comparison of Gold and Silver prices
The prices for gold and silver are affected differently during different circumstances. Gold has returned 5.5% in the last decade, while silver has returned 0.7%. But a huge divergence has been observed between the price movements of the two. The Edelweiss Gold and Silver FOF plans to capture this divergence. And they plan to do that by providing equal allotment to gold and silver. No tactical calls would be taken for or against either of the metals depending solely upon the predominant trends in their valuation. If there is a sharp increase or decrease in the value of either metal that distorts the balance between them, the better performing one will be sold by the fund to retain consistency. This would result in profit booking without any tax liability for the investor. However, whether both metals are needed in the investor’s portfolio is a question that remains largely unanswered.
When compared to gold, silver has higher volatility besides being correlated with stocks. This makes silver less of a diversifier than gold. Experts believe that silver shows the same behaviour as other risk assets; thus, it doesn’t provide any added advantage if added to the portfolio. Both gold and silver, however, have an inverse correlation with the dollar. And this is exactly what could prove to be favourable for both metals. However, the value of the dollar is expected to weaken soon, which will lead to an increase in the price of precious metals in the upcoming years. But this can happen only with the normalisation of the excesses of liquidity impacts.
Related: 5 assets that you can liquidate quickly in case of an emergency
What should you do?
In the long term, gold will be useful for portfolio diversification. With silver, the returns may get a boost but at the cost of possible volatility. Experts in the field thus suggest investors treat both gold and silver as different investments. Adding silver to the product will not bring desired results if you intend to lower the volatility of silver associated with equities. Thus, if you wish to go for long-term investment, experts suggest investing in gold rather than a combination of gold and silver. Are you aware of these Short term investment options for high returns?
Gold or Silver: Which is Better
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.
