- Date : 14/10/2022
- Read: 3 mins
Silver prices are much more volatile than gold because institutional investors like pension funds, governments, or central banks hold gold in massive amounts.
You should diversify your portfolio as it helps mitigate your risk. Real estate, debt, bullion, and equity are some of the main portfolio products for investing. Real estate costs a lot, and not everyone can invest in it. An investor looks to bullion, debt, and equity to diversify. One such attractive option to invest in is silver and silver ETFs. Let's dive in and get to know more about it!
How can you buy silver?
You can purchase silver in physical forms, such as utensils, coins, or bars. You can also get a silver contract on commodity exchanges. However, you do not get to invest electronically and get trading options instead. It has become hassle-free and easier to invest in silver as SEBI has permitted silver ETF.
What is Silver ETF, and Should you Invest?
Silver ETF is an exchange-traded product that can be sold or bought just like shares on stock exchanges. A mutual fund house has to invest at least 95% of the corpus in physical silver. They can also invest in ETCDs (Exchange Traded Commodity Derivatives) in which the underlying asset is silver. A mutual fund house has the option to invest a maximum of 10% in silver ETCD. Fund houses have to keep the silver in physical form, with a third party, a custodian. Fund houses have to obtain auditor reports for verification physically at periodic intervals. You can save storage costs if you invest in silver ETFs and can also save insurance premiums. You also have to pay the Goods and Service Tax (GST) when you buy silver, but you don't get any credit while selling physical silver. It results in a reduction in the overall return that you get. On the other hand, a fund house pays its GST when they physically purchase the solver and get its credit during its sale. GST is not added to their costs this way.
There is a lot of volatility in the prices of silver, which are influenced by economic and industrial growth. Axis Mutual Fund is the seventh largest fund house in India and joined the list of fund houses in India that have started offering silver ETFs. SEBI (Securities and Exchange Board of India) gave silver ETF guidelines in November last year, but NFO (new fund offer) bans led to delayed launches. ACE MF, a mutual fund researcher, says the ETFs in the market now manage investor assets worth Rs. 900cr. Among those offering silver ETFs are Edelweiss MF, DSP MF, Nippon India MF, ICICI Prudential MF, Aditya Birla Sun Life MF, and HDFC MF, apart from Axis MF.
Silver prices are much more volatile than gold because institutional investors like pension funds, governments, or central banks hold gold in massive amounts. Many electronic components are made from silver, used extensively across many industries. Some of its uses are vehicle batteries, electronic gadgets, nuclear reactors, medicine, and photovoltaic cells. Traders with short-term horizons often prefer silver because of its volatility.
Silver can be a safe bet for global growth and economic recovery. Gold prices affect silver prices because silver is seen as gold's alternative. DSP MF, ETFs, and passive investments, manager Ravi Gehani, says silver follows gold prices, and investors go after both these precious metals during uncertain economic times. However, people believe silver is gold's less expensive alternative.
What is silver ETF?|Should you buy Silver ETF ?| How to invest in Silver ETF | Watch this for details
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.