Silver ETFs something that you got to know about

Silver as a precious metal, is also considered to be an auspicious metal in India. Indian households buy silver jewellery on auspicious occasions and festivities. Moreover, Silver is also a very popular gift especially for young children and for decorative purposes e.g. for idols of deities. In developed markets, Silver is also an asset class from an investment standpoint. Though Gold exchange traded funds or Gold ETFs have been introduced in the Indian market a long time back, Silver exchange traded funds or Silver ETF is still a recent phenomenon in our financial market. Let’s know a little more.

Physical Silver and its limitations

Traditionally, buying silver in India has been in physical form i.e. silver jewellery, silver bars or biscuits and silver coins. While you can purchase physical silver for jewellery or decorative purposes, it is not suitable for investment. As the physical silver has many impurities that are very difficult to detect. Mostly silver jewelleries or coins will have impurities, the cost of which gets deducted from the price you get when selling the same. The other common problem with silver, particularly the silver jewellery is that it requires regular maintenance in terms of polishing and shining. Finally, there is storage cost (bank locker rental) for keeping the Silver in safe custody.

Silver as an asset class

• Like Gold, Silver is also seen as a store of economic value and good investment over the long-term horizon. Over a long period of time silver can retain its purchasing power, and is therefore, has traditionally been seen as one of the safest assets in India.
• Apart from its use in jewellery and coins, etc. silver is also used by Solar panels, Smartphone and Electric vehicle and other industries.
• Silver, as an asset class, can be used in your asset allocation to diversify the risk in your portfolio because silver has low correlation with equities. Silver can make your portfolio more stable.
• It is always prudent spreading your investments over different asset classes (known as asset allocation). Asset allocation diversifies / reduces the portfolio risk. Both gold and silver can be used for your asset allocation.

How to invest in Silver as an asset class?

Silver ETF is a much more cost-efficient way of investing in silver as there is no risk of impurities, no maintenance and no storage costs. They can be much more convenient, cost efficient and liquid investments compared to physical silver.

What are Silver ETFs?

Silver ETF is a financial instrument which tracks the price of pure silver. These instruments invest in physical silver or silver related instruments. Physical Silver of 30 kg bars with fineness of 999 parts per thousand (or 99.9% purity) conforming to London Bullion Market Association (LBMA) Good Delivery Standards are only permitted by SEBI for Silver ETF India funds.

How to invest in Silver ETFs?

You need to have Demat and trading accounts to invest in Silver ETF Fund. You can buy or sell Silver ETFs at market prices on the stock exchanges through your stockbroker. Though Asset Management Companies (AMCs) do not provide SIP facility for ETFs, some stockbrokers provide SIP like facilities for investing in ETFs. Check with your stockbroker, if you want to invest systematically from your regular savings in Silver ETFs.

How can you buy and sell Silver ETFs?

During the New Fund Offer (NFO) period of an ETF, you can subscribe to the ETF at par value. After the NFO closes, the ETF is listed on the stock exchange and trades like shares of listed companies. After the NFO period you can buy Silver ETF units on the stock exchanges through your Demat and trading account at prevailing market prices (ask / offer prices). You can buy and sell the Silver ETFs on the stock exchange like any other stock/shares.