The surge in precious metal prices has prompted the majority of investors to expand their portfolio in various forms of the gold and silver assets, particularly exchange-traded funds, or ETF.
In India, Sebi-registered asset management companies, who are listed on stock exchanges, offer ETFs that allow investment on gold and silver stocks where the value is adjusted after taking its market price, supply and demand.
Investment in gold and silver ETFs carries risks. Experts advise investors to enter the market only after knowing the underlying risks, volatility, as well as the fund’s tracking error, expense ratio, to name a few.
As gold and silver tends to provide more returns over a long-term period of investment, it is generally recommended to evaluate the ETF’s performance over a period of time to understand its consistency in performance, growth, and returns.
Here, we assess data from Emkay Wealth Management on the returns of gold and silver ETFs over the past one, three, and five years, respectively.
For investors looking to expand their portfolio in either gold ETF or silver ETF, the entire money is invested in a single precious metal, where its underlying net asset value (NAV) is used to track its market price in stock exchanges.
Gold and silver ETFs mirror their price from London Bullion Market Association (LBMA), not the domestic spot price of these precious metals. It is one of the reasons why the price of gold and silver is different from their ETF counterpart. Other factors include AMCs discretion on applying premium and discount at different frequencies, tracking error, to name a few.
Emkay Wealth Management selects three gold ETFs that have delivered over 17 percent return in the last five years. Comparatively, the return from silver gold was just over 19.01 percent during the period.
Similarly, two silver ETFs have delivered 35 percent return in three years. The physical silver has provided returns of over 29.11 percent in the same period.
These include HDFC Gold ETF, Kotak Gold ETF, Nippon India ETF Gold BeES, ICICI Pru Silver ETF, and Nippon India Silver ETF.
“Those who are already invested may hold on to the positions and add on dips. Fresh positions may be initiated on testing of the lower price bands,” said the Emkay Wealth Management report.
According to the report, gold ETFs year-to-date inflows stand at$65 billion. The addition to ETFs in the last three months is close to $20 billion. The central banks and other institutional buyers have taken additional exposure to gold since 2021-22, and they are systematically increasing their exposure to gold.
Investors are advised to tread with caution when investing in gold and silver ETFs. The past returns don't guarantee that the asset will perform as per your set expectation. Consult with financial advisors, or registered fund managers, before making any investment commitments.
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