What are Silver Exchange-Traded Funds. Silver ETFs are providing good returns. They are considered to be effective diversifiers of portfolios too.
Silver ETFs made their debut in India in January 2022. (Picture Credit: Freepik)
Though silver is considered an auspicious metal in India, it always played a somewhat second fiddle to gold in Indian culture. But put the lens on silver as a medium of investment and you would find it shining. Did you know, silver exchange-traded funds (ETF) are rapidly gaining popularity in India with substantial returns?
Experts say they are useful to diversify the portfolio, especially when equity valuations become stretched. Silver ETFs made their debut in the country quite recently, as late as January 2022, when ICICI Prudential launched its silver fund. Right now there are about 20 silver ETFs trading in the Indian market. Major AMCs such as HDFC, ICICI, Tata, Axis, Aditya Birla Sun Life, Nippon, Kotak offer these funds.
Silver ETFs returns
A glance at the rate of returns generated by Silver ETFs in the past one year reveals that 21.48% is the lowest (Motilal Oswal Gold and Silver ETFs Fund of Funds). The highest is 28.39% which is provided by Aditya Birla Sun Life Silver ETF FOF – Direct Plan.
As many as four funds offer returns of more than 25%.
A report in the last week of May this year revealed silver ETFs provided average returns of 26.08% since January 2024. Some of the better performers included HDFC Silver ETF, UTI Silver ETF FoF, Axis Silver ETF and Aditya Birla SL Silver ETF which delivered returns of 27.87%, 27.25%, 26.95% and 26.14% respectively.
How to buy Silver ETFs
Silver ETF units can be purchased in the stock exchanges through a demat and trading account at current market prices.
ETFs are usually passive funds and, therefore, they track a particular index.
All AMCs (asset management company) publish NAVs (net asset value) of ETFs at the end of trading every day.
One point to note is that there is no minimum investment amount in Silver ETFs and one can buy even one unit.
At the NFO stage
One can also buy it in the NFO stage (New Fund Offer) when one gets the opportunity to buy it at a par value, usually Rs 10 a unit. The ETF is listed on the stock exchange after the NFO and they trade like shares of listed companies.
As an asset class silver is useful to diversify risk in a portfolio. The logic: this metal has a low correlation with equities. Experts are of the opinion that when equity shares seem to be overstretched in valuation, the utility of silver in the portfolio rises.
Putting all your eggs in the equity basket is what all experts continue to caution investors against.
Silver in tradition
Traditionally, the use of silver has been popular in India in many forms – as jewellery, coins, bars, biscuits, figurines for decorative purposes and utensils. It is also considered auspicious in many households.
However, metallic silver is not suitable for investment purposes. There could be impurities which will result in price being deducted when one tries to sell it. Moreover preserving silver is a bit problematic since the colour tarnishes in contact with air and requires regular polishing to maintain its shine.