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Silver is not just a precious metal but also an industrial commodity with wide applications. As Indian investors seek diverse ways to include silver in their portfolios, Silver Exchange Traded Funds (ETFs) have emerged as a modern investment avenue. Launched in India in 2022, these ETFs offer a convenient, paper-based way to invest in silver without needing to hold the metal physically. In this article, we explain what silver ETFs are, how they function, and the key factors you should know before investing.
Silver ETFs are mutual fund schemes that invest in physical silver or silver-related instruments. They are regulated by the Securities and Exchange Board of India (SEBI) under the mutual fund framework, ensuring investor protection and transparency.They are listed and traded on stock exchanges, just like stocks.
These ETFs track the domestic price of silver, adjusted to reflect expenses such as storage, insurance, and management fees.
By investing in silver ETFs, investors gain exposure to silver prices without dealing with the complexities of physical storage, purity verification, or security risks.
Silver ETFs pool money from investors to purchase standardised silver bars (usually 99.9% purity). The Net Asset Value (NAV) of the ETF reflects the current market price of silver.
Investors can buy or sell units on stock exchanges during trading hours, just like equity shares. The minimum investment usually depends on the price of a single unit, which is often equivalent to the price of 1 gram of silver.
These features make silver ETFs a regulated and efficient alternative to holding silver jewellery or coins.
Feature |
Description |
|---|---|
Underlying Asset |
Physical silver (bars) of high purity |
Mode of Investment |
Through stock exchanges or demat accounts |
Liquidity |
Traded on NSE/BSE with daily price updates |
Purity Standards |
Typically 99.9% (LBMA-accredited or equivalent) |
Storage & Custody |
Managed by the fund house in secure vaults |
Tracking Error |
Minor deviation from spot silver prices due to expenses |
Here's why you might consider adding silver ETFs to your portfolio:
Silver ETFs can be bought and sold quickly through a demat account without needing to visit a jeweller or bullion dealer.
The silver held is usually of 99.9% purity, ensuring investors get the best quality standard without verification hassles.
No making charges or storage concerns as compared to physical silver. Expenses are limited to fund management fees and brokerage.
Silver can act as a hedge during inflation or economic uncertainty and often moves independently of equities and bonds.
Since silver ETFs are traded on exchanges, investors get live pricing and NAV disclosures on a daily basis.
As with any market-linked product, silver ETFs carry inherent risks and should be evaluated within your risk appetite.
Risk Type |
Explanation |
|---|---|
Price Volatility |
Silver prices fluctuate based on global demand-supply trends |
Tracking Error |
Returns may slightly deviate from actual silver price |
Limited Historical Data |
In India, silver ETFs are relatively new (post-2022) |
Regulatory Changes |
Taxation or investment limits may evolve |
No Physical Redemption |
Unlike Gold ETFs, most silver ETFs don’t allow physical delivery |
For modern investors, ETFs may be more suitable unless physical possession is necessary for ceremonial or gifting purposes.
Parameter |
Silver ETFs |
Physical Silver |
|---|---|---|
Purity |
99.9% (verified by custodian) |
Varies depending on source |
Storage |
Not required |
Needs safe custody, incurs additional cost |
Liquidity |
High (exchange-traded) |
Depends on buyer/seller availability |
Making Charges |
None |
Applicable in jewellery or coins |
Pricing |
Transparent and standardised |
May vary by region or seller |
Risk of Theft |
None |
Exists with physical possession |
Silver ETFs are taxed like non-equity mutual funds:
Short-Term Capital Gains (STCG): Gains from silver ETFs held for less than three years are added to your income and taxed according to your applicable income tax slab.
Long-Term Capital Gains (LTCG): If held for more than three years, gains are taxed at 20% after applying indexation benefits, which adjust the purchase price for inflation.
Dividends, if any, are taxed as per income slab under the head "Income from Other Sources".
If you're exploring ways to diversify your portfolio, Silver ETFs could be a smart addition. Here's when you should consider investing in Silver ETFs:
If you want diversification beyond traditional assets like gold and equities
If you’re looking for exposure to the broader commodity markets
If you prefer a transparent and regulated route to track silver prices
If you like digital investment formats over physical silver storage
Silver ETFs may suit you especially well if you’re a passive investor aiming to include silver as part of your long-term investment strategy.
Here's how you can start investing in Silver ETFs:
You need a Demat and trading account to buy or sell Silver ETF units on stock exchanges.
Explore options from asset management companies (AMCs) like ICICI Prudential, Nippon India, HDFC, and others.
Log into your broker’s platform or mobile app, select the desired Silver ETF, and place a buy order during trading hours.
Regularly track the fund’s Net Asset Value (NAV), expense ratio, and tracking error to stay informed about your investment’s performance.
Silver ETFs offer a convenient, cost-effective, and transparent way to invest in silver in India. They eliminate the need for physical handling while offering exposure to silver prices in real-time. While relatively new in the Indian mutual fund landscape, these ETFs can play a vital role in diversifying an investor’s portfolio. However, as with any commodity, investors should understand the risks and assess their financial goals before investing.
This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.
Usually, the minimum is equivalent to the price of 1 gram of silver. You can invest with small amounts via demat platforms.
Most silver ETFs do not offer redemption in physical form. They are meant for digital exposure only.
Silver ETFs invest directly in silver, while mutual funds that invest in silver ETFs are called FoFs (Fund of Funds). ETFs offer better liquidity.
They are regulated by SEBI and backed by physical silver held in secure vaults. However, like all investments, they carry market risk.
Through your demat account, just like you would sell shares, during regular market hours.
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