For most Indians, precious metals such as gold and silver have both financial and emotional importance. However, purchasing, holding, and selling has gotten more complex. To address these difficulties, gold ETFs were launched at the time, and now corporations have introduced silver ETFs.
The capital market regulator, the Securities and Exchange Board of India (SEBI) enabled mutual fund firms to introduce Silver ETFs in India in September 2021, in response to increased demand for silver. Let us discuss the features of the silver ETF in detail.
What is a Silver ETF?
Silver has various industrial applications in addition to being a valuable metal. It is in high demand in the industries of manufacturing, investment, and jewellery. More than half of silver is used in heavy industry and high technology, according to the world silver survey study.
A basket of assets that tracks an underlying index is known as an exchange traded fund (ETF) and Exchange-traded funds that monitor the price of silver are known as silver exchange-traded funds.
Why should you invest in a Silver ETF?
- Silver is a physical commodity and it may be used in a variety of ways.
- It can be used as a possible inflation hedge.
- The investor gains more liquidity by holding the commodity in the form of ETFs.
- Investors do not need to be concerned about purity or quality.
- Silver ETFs allow investors to invest in silver without incurring storage charges.
- Investing in silver during a crisis is a wise decision.
- Silver diversification can help to lower overall portfolio risk.
How is Silver ETF different from Gold ETF?
People use silver and gold for a variety of purposes. In the financial market, silver is more susceptible to economic changes than gold, which has limited applications outside of jewellery and investment. This is due to its increased industrial utilisation.
When economies expand, demand for silver tends to rise." When inflation rises, this also helps silver to grow higher than gold. As a result, silver is a stronger inflation hedge.
Gold is treated as a currency for all purposes and moves in lockstep with interest rates. The gold price is not entirely influenced by supply and demand. Silver, on the other hand, takes its signals from gold and is subject to further volatility due to industrial demand.
Gold is considered to be a better alternative for those who desire stability in return, such as retirees, while silver is better suited for high-risk investors. According to experts, it is preferable to keep 5-10% of your portfolio in gold and silver together at any one moment.
India’s First Silver ETF
ICICI Prudential Mutual Fund, India's second biggest fund firm, has launched India's first Silver ETF. From January 5 until January 19, 2022, the ICICI Prudential Silver ETF will be available for purchase. The Scheme's goal is to provide returns that are consistent with the performance of physical silver in domestic prices as determined by the LBMA AM fixing prices.
The revenues of the programme will be invested in Physical Silver and silver-related securities. Exchange- Traded Commodity Derivatives (ETCDs) using silver as the underlying asset are also classified as a silver-related instrument.
The ICICI Prudential Silver ETF will be measured on the domestic silver price as determined by the LBMA (London Bullion Market Association). Investors can invest as low as ₹100 in the plan during the new fund offer (NFO) period, and after the scheme is registered on stock markets, you can purchase and sell shares of the scheme.
Silver will play an important part in future technologies such as 5G telecommunications, electric cars, and renewable energy. This brings up new opportunities for the use of silver metal.
Precious metals, such as gold and silver, can be added to your portfolio since their values are often uncorrelated with those of other securities, such as stocks and bonds, lowering total portfolio risk. According to experts, investors can consider silver as a long-term investment option.