Not everyone wants to store metal in a cupboard or locker. Younger investors often start by checking the Silver Rate Today in Delhi on their phones and then ask whether they can buy silver without handling it physically. The answer is yes, and the options are growing. Investors in other regions follow similar routes, and someone monitoring the Silver Rate in Hyderabad can now take exposure to the metal through a demat account in minutes. This article explains the main paper and digital routes available in India today.
Silver Exchange-Traded Funds
Table of Contents
A silver ETF is an exchange-traded fund that holds physical silver and issues units in demat and trading accounts. Each unit represents a certain quantity of the metal. You can buy and sell these easily on the stock exchange.
The benefits are straightforward — there is no question of purity or safe custody. Prices are easily discoverable and transparent, and you only pay a small annual expense ratio and brokerage as compared to the premium over the metal price for physical products. This makes it an attractive option for investors to gain exposure to silver.
Silver Fund of Funds
Not everyone has a demat account, and for such investors, funds of funds are an option. These are mutual funds that invest in silver ETFs on your behalf. These funds also allow you to start investing systematically with relatively small amounts of money every month.
It is a simple process, similar to investing in any other mutual fund. The only difference is that you’re indirectly exposed to the price of silver. The expense ratio is slightly higher since you’re paying for two funds, but many investors are willing to bear this extra cost for the ease of a systematic investment plan.
Digital Silver Platforms
There are a number of mobile apps and fintech platforms that offer to buy small quantities of silver online and store them in insured vaults on your behalf. Some such platforms allow you to start with small investments and have attractive options for young investors or students to start accumulating gold.
However, such portals are not as regulated and transparent as ETFs or mutual funds, and it is important to do your research before committing large sums of money to such a platform. Do not overlook the importance of checking the fine print before signing up.
Taxation and Holding Period
The taxation norms and holding period vary across products and can change with the Union Budget every year. Long-term capital gains on silver ETFs, physical silver and fund-of-funds are taxed differently. It is always a good idea to consult with a CA or tax expert before buying any of these products. In addition, it is important to keep copies of all relevant contract notes and documents handy, as these might be needed when filing the tax returns.
Physical Versus Paper Gold
Physical silver may seem like a safer option, but it comes with additional costs and risks. You have to bear the premium over the metal price, as well as the risk of theft and questionable purity of the metal. ETFs and other paper-based investment vehicles are much more convenient and come with lower expense ratios and are more transparent. However, you cannot give someone a digital asset as a gift, so physical silver might be more appealing for festivals and gifting purposes.
It is always a good idea to have some physical silver as part of your silver allocation, while investing the rest in ETFs or mutual funds. This way, you can enjoy the best of both worlds.
How to Get Started
Decide on the proportion of your portfolio that you would like to allocate towards silver. Most financial planners suggest that gold should comprise only a small part of your overall portfolio, as it is a volatile asset class. Open a demat account with a reliable broker if you wish to invest in ETFs, or a mutual fund platform if you wish to go for a fund-of-funds structure. Remember to start small and add to your allocation as you become more comfortable with the process. Do not take loans to invest in silver, and never park all your savings in one asset. With the proliferation of digital investment options, silver has become much easier to buy and sell. But it is important to remember not to get carried away and to invest responsibly.
