Kolkata: Though gold has hogged the limelight over the past two years, silver is no less a wonder metal. The white metal is an all-weather asset with multiple demand points, and therefore, multiple price drivers. Naturally, it will be attractive for investors. In fact silver outperformed gold in the bull runs of 2009-2011 and 2020, though the higher returns were accompanied with higher volatility.
But what is the best way to invest in silver, which is not only coveted by a large number of investors but also in demand from diverse industrial sectors such as renewable energy, semiconductors, IT and electric vehicles. Due to this wide industrial usage, economic growth impacts the price of silver.
Physical silver is bulky
Physical silver is bulky, which makes it impractical to invest a significant amount in it and store the metal, thinks Chintan Haria, principal – investment strategy, ICICI Prudential Mutual Fund. “Physical silver is bulky making it difficult or impractical to invest in a meaningfully large way. For instance, price of silver is currently hovering around Rs 97 per gram which means to invest just about a lakh of Indian rupees, one has to store 1 kg of silver. Keeping such large amounts at home is not safe, requiring individuals to store the metal in vaults.”
Haria also emphasises the point that if one hires a big storage space — typically the vault of a bank — it erodes the effective returns. “The bulky nature also makes it difficult to liquidate quickly or with ease. Premiums at time of purchase and discounts at time of sale lead to high buy-sell spreads which dampen returns,” he points out.
The case for Silver ETF
Haria offers a simple solution. Go for Silver ETF (exchange traded funds). “Exposure to silver through Exchange Traded Funds can address all these issues. Silver ETFs invest in physical silver with the aim of replicating silver returns. The metal is bought and stored by the ETF which relieves investors from storage costs and concerns. Units of silver ETFs trade on exchanges like shares making instantaneous liquidity possible. These units trade close to market prices which optimises investor returns,” says the analyst.
He also points at the taxation angle. The gains one makes from Silver ETFs are treated as long-term after a holding period of 12 months. Incidentally, this period is just half of the 24-month holding period which is applicable for gains from metallic silver. Incidentally there are a dozen Silver ETFs in India now. Sebi approved Silver ETFs in November 2021. One needs a demat account to invest in ETF.
(Disclaimer: This article is only meant to provide information. News9 does not recommend buying or selling shares or subscriptions of any IPO, Mutual Funds, precious metals, commodity, any form of alternative investment instruments and crypto assets.)
Silver is not considered not only a safe-haven asset but also an all-weather asset since it has got a widening array of industrial uses apart from its traditional role as a value preserver like gold. Chintan Haria, principal – investment strategy, ICICI Prudential Mutual Fund tells News9live.com readers which is the best instrument to invest in silver. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
