Should investors consider silver ETFs?

Mutual fund investors can replace physical gold by investing in exchange-traded funds with the yellow metal as the underlying asset. They now have a similar option for the money.

Three asset managers, including ICICI Prudential Mutual Fund and Aditya Birla Sun Life Asset Management Co., are launching silver exchange-traded funds in January. In September last year, the market regulator authorized silver ETFs.

“Silver ETF, like gold ETF, is a very easy way to invest in silver as a commodity through the financial channel,” said Chintan Haria, Head of Products and Strategy. at ICICI Prudential Mutual Fund, to Niraj Shah of BloombergQuint during a weekly special. The Mutual Fund Fair. “It’s a simple way for investors to participate in a financial product that will eventually be listed on a stock exchange and investors can buy and sell. They will basically be exposed to silver and the price of silver in international markets is converted to Indian rupees.

According to Gaurav Rastogi, Founder and Managing Director of Kuvera.in, having an easier way to invest in silver or hold silver is a good idea. Silver is a “bit more procyclical” to growth than gold due to its industrial uses, he said on the same show.

Rastogi urged investors to look at the gold-silver ratio, which is trading at one of its lowest points. According to him, the biggest risk factor for the gains of any ETF on silver is that the two metals lose the “stamp of safe assets”.

“People are happy with the currencies. They haven’t had a really bad tail risk event in a very long time where you would hear stories that nothing but gold would work, or nothing but silver would work. This type of framing is one of the risk factors…but otherwise a great opportunity for precious metals investors who now have a very easy way to buy silver,” Rastogi said.

Also, silver returns may increase in the future, they said.

According to Haria, “For almost 10 years, silver has had virtually no return except for a big jump we saw between March 2020 and August 2020 where both silver and gold surged , but a 10-year CAGR is only about 2% in silver”.

Over the next two years, he said, there is potential for the silver to increase given its industrial use in electric vehicles, 5G mobile technology and the medical industry. “Silver is a good addition for portfolio diversification, especially when other asset classes like equities and debt don’t look as attractive based on relative valuation.”

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