February 6, 2023
If you can make a profit by investing without going to the market and buying gold or silver, and without the risk of maintaining it

If you can make a profit by investing without going to the market and buying gold or silver, and without the risk of maintaining it. If this happens, how heavy! Exchange-Traded Funds, i.e., ETFs, have been launched to fulfil this desire.

While gold ETFs have been around in India since the beginning, silver ETFs were launched in January this year. With these ETFs, you can diversify your portfolio.

To begin with, what is a silver ETF? Before understanding this, let’s see what an ETF is. Exchange Traded Funds are ETFs in which investors can buy stocks, bonds, gold, or other instruments at the same time. Investors buy units or shares of any ETF and their money is invested elsewhere with a specific objective..for example, silver ETF money is bought into silver or silver related instruments.

ETFs are also considered passive funds because the underlying asset is not frequently bought or sold. Like shares, ETFs are bought and sold in the stock market. As a result, it has characteristics of both a mutual fund and a stock market.

As a rule, the fund manager of a silver ETF invests at least 95% of the fund’s assets in products like physical silver or exchange-traded commodity derivatives. Its underlying asset is silver. Now let’s look at the benefits of investing in silver ETFs. Investing in silver ETFs saves the cost of holding silver in physical form and insurance premiums. GST is payable after the purchase of silver. GST is not refundable when you sell physical silver.

The returns from silver ETFs are closely related to the domestic market. This is how this ETF is designed. Silver ETFs also have tracking errors. Tracking error represents the difference between a scheme’s return and the benchmark. According to SEBI norms, mutual fund houses should keep the tracking error of silver ETFs below 2 percent.

LBMA. Silver ETFs track the price of silver determined by the London Bullion Market Association, i.e., LBMA. According to the rules, if the tracking error in a silver ETF exceeds 2%, the fund house is required to publish the information on its website.A mutual fund house must purchase 30 kg silver bars of 99.9% purity as per LBMA standards in order to run a silver ETF scheme.

At current prices, silver is 90 times more expensive than gold, requiring more space for storage, security, and more infrastructure to maintain it. Therefore, investing in a silver ETF is a safe and good option, according to Vikram Dhawan, Head of Commodities and Fund Manager, Nippon India Mutual Fund.

Silver ETFs hold international quality silver bars. Usually, silver ETFs are more volatile than the physical silver market. Silver ETFs have been launched this year. Also, due to price pressures, the returns have not been particularly visible. But one needs to invest for a long period of time to understand exactly how much return a silver ETF gives.

Silver ETFs allow trading during working hours on stock exchanges. While buying and selling, the investor can take advantage of the fluctuation in the price of silver. But while buying and selling silver in physical form, there are difficulties in transporting silver from one place to another. I have to take So there are difficulties in taking a profit on physical silver. In the Silver ETF, an investor can buy and sell silver with just one click on their phone or computer.

Before investing in silver ETFs, read all the documents carefully and understand the risks involved. Silver ETFs are beneficial for experienced investors who understand how metals and commodities trade. Investing in silver ETFs is for the long term. Also, since most of the silver ETFs are new to the market, it will take some time to understand the exact returns.

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