What is a silver ETF?
A silver ETF, or exchange-traded fund, is a fund that is priced in terms of silver. You no longer need to store silver in the house or in a locker but you can purchase units of the fund in the stockmarket, as you would purchase shares. The fund meanwhile maintains the silver in vaults or in financial instruments that are priced in terms of the latter.
Why pick silver ETFs
For centuries, silver was thought of as a lifeline in times of crisis for Indians. Today, it also has practical applications in the solar, electronics, and batteries sectors. You do not have to worry about purity, storage, or sale with a silver ETF. It is as easy as buying or selling it from your demat account whenever you want.
How they operate in practice
When you buy a unit of a silver ETF, you buy a slice of the silver that the fund owns. As the value of silver goes up or down, so do the units you own. Since ETFs list on an exchange, you can quickly sell out if you need to. That kind of convenience is highly attractive to individual investors who do not care to handle physical silver.
Advantages and disadvantages
The biggest advantage is convenience — no lockers, no risk of theft, and no need to invest huge amounts. Anything in small quantities works. The disadvantage is, of course, that the prices of silver can fluctuate much, and ETFs do not make you feel that you own real silver. Furthermore, if the ETF is based on futures rather than actual silver, expenses can eat into profits.
Options available in India
Indian silver ETFs remain relatively recent, entering the scene in 2022. Major players such as Nippon India and ICICI Prudential have introduced products whereby the base silver is kept in safe vaults. It is also possible to buy into silver funds-of-funds that invest in these ETFs, in case you would rather not touch ETFs directly.
Is it worth it
If you want a low-maintenance solution to introducing some silver into your investment kitty, ETFs make sense. Just keep in mind that the value of silver is unpredictable. Look at it as a diversification tool, not all-bets-on money. For most people, having a small chunk of their investments in silver makes sense, and an ETF is the simplest way to do it.
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