Precious metals like gold and silver have strong cultural significance in India. Gold and silver are also seen as store of value since ancient times. Most Indian households prefer to invest and hold gold and silver in physical form. However, investors in developed markets prefer to invest in gold or silver as financial assets e.g. Exchange Traded Funds (ETFs). Gold ETFs were launched for the first time in India around 15 years back, but Silver ETF is relatively new. In this article, we will discuss about Silver exchange traded fund or Silver ETF.
Since Silver ETFs are relatively new, most Indian households still buy silver in physical form e.g. silver jewellery, silver coins, bars and biscuits. The main problem with physical silver as an investment is impurity. Most silver jewelleries will have impurities. The impurities will be deducted from the price of silver when you are selling. The other problem with silver jewellery is maintenance as it requires regular cleaning / polishing to remove the tarnishes and maintain glaze. Finally, you need to incur storage costs (example – bank locker rent) for silver jewellery, bars and coins. Silver ETF Fund is a cost efficient way of investing in silver as there is no risk of impurities, no maintenance and no storage costs are involved. They can be much more convenient, cost efficient and liquid investments compared to physical silver.
Silver ETFs are financial instruments which track the price of pure silver. These instruments invest in physical silver or silver related instruments. Physical Silver of 30 kg bars with fineness of 999 parts per thousand (or 99.9% purity) conforming to London Bullion Market Association (LBMA) Good Delivery Standards are only permitted by SEBI for Silver ETF India funds.
Investors should consult with their mutual fund distributors/ financial advisors to know what is flexi cap mutual funds and if it is suitable for their investment needs basis their risk profile.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.