Silver ETF

Diversification is the soul of investing. It also helps you to reduce the risk of having all your eggs in one basket. However, when you plan to invest in commodities, the first thing that comes to your mind is gold. This is mostly because we did not have hassle-free access to invest in any other commodities through investment routes like mutual funds.

In this article, we wish to introduce you to a new way of investing in silver and how to go about it.

Why should you invest in Silver?

‘Sona’ and ‘Chandi’ have been the traditional best forms of Investments for Indian households. We have always looked at buying Chandi for everything auspicious. Silver also gets consumed irretrievably in traditional industrial and renewable energy and electronics. Demand for silver is expected to remain constant and in the long term, it is believed that there would be a mismatch between demand and supply of silver, resulting in higher appreciation in silver prices in the future.

Therefore, silver is among the preferred option globally when it comes to investing in precious metals. Historically, in times of increasing inflation, the value of silver increases and vice versa. Interest rate hikes play a role in inflation, thereby increasing the attractiveness of silver while decreasing the attraction of other asset classes.

How can silver be bought?

Silver can be purchased in physical forms like bars, coins, and utensils. We can also take exposure to silver contracts on commodity exchanges but commodity exchanges offer you trading options rather than investing options in electronic form. As far as electronic options to invest in gold are concerned, there are plenty of options to invest in like gold ETF, gold saving funds, and Sovereign Gold Bonds, but till very recently there were no options available to invest electronically in silver. However, with SEBI permitting silver ETF in November 2021, investing in silver is also becoming easier and hassle-free. 

What are Silver ETFs? 

Like Gold ETFs, Silver ETFs track the prices of silver. These ETFs will invest at least 95% of net assets in silver and Exchange Traded  Commodity  Derivatives (ETCDs) having silver as the underlying. These funds are benchmarked against the price of silver (based on London Bullion Market Association, or LBMA, Silver daily spot-fixing price).

Investing in silver through a silver ETF helps you save on costs of storage like locker rent as well as insurance premiums. Moreover, when you buy physical silver you have to pay the GST (Goods and Service Tax) but no credit is available to you for GST paid when you actually sell the physical silver. This actually reduces the overall return on your investments. Since the fund house though pays GST at the time of physical purchase of silver and gets the credit at the time of sale, effectively GST does not add to their cost of investment. It is just inconvenient to invest in physical silver because they turn grey and black in humidity as well.

How to invest in Silver ETFs?

Silver ETFs are traded on the stock exchanges so you need to have a Demat account as well as a trading account for investing in silver ETFs.  You can invest in silver ETFs like any other ETF. 

To know more about ETFs - refer to our article here.


Gold and silver both are capital assets and are treated as debt products. Your investment in bullion, whether physical or electronic, becomes long-term after 36 months.

So, Sold before three years: Taxed as per slab Rate

Sold after three years: 20% LTCG with indexation benefits. 

Wealthcafe Advice: 

Silver does not need a special allocation in your portfolio. Like you do not have to go out of your way to make funds available to invest in silver ETF. It can form a part of the gold allocation of your asset allocation. Precious metals i.e. gold should be around 5% of your asset allocation. Your silver will also form a part of your existing gold allocation. Do note that gold should have a larger share as it has a better hedge and has a lower correlation to debt and equity. 

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