How To Smartly Buy Silver In India – Silver ETFs

Given the high inflation backdrop, increasing demand for silver in EVs and solar industry, and limited supply, silver is a great investment in my view. Its demand from industry is rapidly increasing as the world undergoes a major green transition to net zero. The world saw a 15% deficit in the supply-demand in 2022. Solar panels, alone contributed to 12% of silver demand last year globally. About 85% of silver is sourced from mining and ~15% from recycling. The white metal saw its all-time high price of $50/ ounce in 2011 but is now trading at less than half of that price of ~$22/ ounce.

There are different ways of buying silver:

i) Physical silver in the form of coins, bars, etc. however, high transaction costs make it hard to trade.

ii) Silver Jewelry suffers from the same drawback as well as involves making charges as well making this option less lucrative.

iii) Buying silver mining companies, but most of them are listed outside India so involve transaction as well as taxation issues. You can buy silver derivatives like futures on the MCX but that is for hard-core traders and not for long-term investors.

iv) The best option to invest in silver in view is through Silver ETFs which SEBI has allowed since last year. Both ICICI Prudential and Nippon AMCs launched their silver ETFs. Both Nippon and ICICI ETFs are fairly liquid as well.

The silver ETFs track the price of silver as trades are in line with the London Bullion market. These ETFs are highly volatile as silver traditionally fluctuates more than the prices of gold. The performance of silver price has been good over the last six months as prices recovered rapidly from ~INR 52,000/ kg to ~INR 65,000/ kg now.

The expense ratio of ~0.4%-0.5% is not high considering that you do not have to bear the storage or security costs. Since they are ETFs, you can easily trade them on stock exchanges just like normal shares. These silver ETFs are safe as independent auditors have to periodically audit whether the AMCs hold physical silver or its derivatives.

Also, read in detail about Sovereign Gold Bond Scheme 2023. 

Silver is a great investment given its usage both as an industrial commodity as well as a precious metal. Indians have traditionally bought silver in the form of jewelry, utensils, coins, etc. However, they are inefficient ways of investing in silver. While you can still buy these for decorative/ consumption purposes, silver ETFs offer a much better way of investing/ trading.