ETFs of Silver
Silver, a commodity that has always been in high demand as it has been widely used in making ornaments. Also, it has been used for investment purposes for years.
It is one of the most useful and important metals in the world. It is used in several industrial processes, including electronics and photography, as well as jewellery making.
If we talk about the prices, then we’ve figured out that the price of this commodity is highly volatile, which makes it a suitable investment option for short-term traders.
Nowadays, silver is also considered a heavy metal for investment purposes and that’s the reason many investors are buying it for safe transactions.
If you want to invest in silver, you can buy physical silver or exchange-traded funds (ETFs).
These days Silver ETFs have emerged as an attractive investment vehicle for both retail and institutional investors. Let’s know about Silver ETF in detail:
What are Silver ETFs?
An ETF is a fund that owns assets such as stocks or commodities and trades on stock exchanges. An ETF can be bought and sold like a common stock on a stock exchange at any time during the trading day.
Silver ETFs are made up of shares that represent an interest in the underlying asset. The price of each share of a silver ETF is determined by what the market is willing to pay for it at any given time during the trading day (like any other security).
When you buy or sell shares of an ETF, your broker will execute the order on behalf of his client (you) through an exchange where the security trades.
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How Do Silver ETFs Work?
Unlike mutual funds, which are priced once per day at the close of business, silver ETFs trade throughout the day based on supply and demand. The price of an individual share will vary throughout the trading day as buyers and sellers interact with each other through computerised systems called electronic communication networks (ECNs).
As long as demand for a particular share remains greater than supply, its price will continue to rise until it reaches its maximum allowable trading price (MAWP) set by its issuer.
As long as demand falls below supply, its price will decline until it hits zero or becomes negative when everyone who wants to sell has done so and no one else wants to buy any more shares at that time.
Also Read – Golden Chance to Invest in Gold
Tax on Silver ETFs
The Income-tax slab rate will be applicable on returns of Silver ETFs if sold within three years of purchase. After which, 20% tax will be charged under long-term capital gains (LTCG) tax with indexation benefits.
Benefits of Investing in Silver ETFs
Silver ETFs can help investors diversify their portfolios by providing exposure to one of the most popular precious metals on the market. Unlike gold, which has recently become more volatile and less liquid, silver is more stable and liquid.
As such, silver ETFs provide investors with a way to balance out their portfolios by adding exposure to another asset class that can reduce risk while still offering some potential returns.
Inflation Protection Benefits
Silver’s price tends to rise when there is high inflation because it acts as an alternative store of value and a means of exchange during periods of hyperinflation or currency devaluation.
This makes it an attractive investment during times of economic uncertainty, particularly when prices are rising rapidly due to increasing demand from developing countries and growing debt levels in developed countries like India.
Also Read – Low-Risk Investment Options in India
Listed on the Stock Exchange
Silver ETFs are listed on stock exchanges, which makes them easier to trade than physical silver. ETFs allow investors to buy and sell large amounts of silver without having to store it.
Silver ETFs are backed by a physical stockpile of silver, assuring that the fund is solvent and has the assets needed to meet its obligations. Silver ETFs can be sold short or used as collateral for other investments.
Silver ETFs are more liquid than physical silver. This means that you can buy and sell your silver ETFs with ease, while physical silver is more difficult to buy and sell.
Silver ETFs provide a quick way to invest in the commodity. Purchasing physical silver takes time, as you must find a seller and arrange for delivery.
By contrast, you can purchase an ETF at any time during market hours. You also don’t have to worry about storing your investment or finding a safe place for it.
Silver ETFs Are More Volatile Than Gold ETFs
While both gold and silver can be risky investments, silver is generally more volatile than gold. This means that its price changes more quickly than gold’s price.
This is due in part because most investors hold less interest in silver than they do in gold, which means that the supply and demand for silver tend to fluctuate more than it does for gold.
This can cause sudden spikes or dips in the price of silver, which makes it more difficult for investors to predict how much their investments will increase or decrease over time.
Popular Silver ETFs in India
ICICI Prudential Silver ETF
The scheme will try to generate returns that are in line with the performance of physical silver in domestic prices as derived from the LBMA AM fixing prices.
The scheme plans to invest its proceeds in physical silver and silver-related instruments. You can benefit from investing in silver ETFs because they provide greater liquidity and fewer storage costs than physical silver.
Aditya Birla Sun Life Silver ETF
Aditya Birla Sun Life Silver ETF is an Open-ended Silver Commodities scheme offered by the Birla Sun Life Mutual Fund House.
The scheme aims to generate returns that are in line with the performance of physical silver in domestic prices, subject to tracking errors.
The current net asset value of the Aditya Birla Sun Life Silver ETF is Rs 62.9939 for its growth option, as of 24 May 2022.
Silver ETFs are similar to gold ETFs in that they are an investment vehicle that allows investors to buy and sell shares of silver. But there are some important differences between these two types of investments.