Silver ETF is a type of ETF that invests at least 95% of its collected corpus from various investors into physical silver and related instruments. Likewise to any ETF which tracks a particular index, a silver ETF’s NAV is directly affected by the price of the silver in the economy. Therefore, it is the best alternative instrument for those who are looking to invest in physical silver but want to avoid the hassle of storing it.
Content:
- Silver ETF India
- Features Of Silver ETF
- Best Silver ETF In India
- Gold Vs Silver ETF
- Silver ETF Taxation
- Silver ETF Returns
- How To Buy Silver ETF In India?
- Silver ETF – Quick Summary
- Silver ETF – Frequently Asked Questions
Silver ETF India
In India, the Silver ETF deploys a minimum of 95% of its corpus into physical silver and silver-related instruments. These instruments serve as the ETF’s underlying asset. A portion, up to 10%, can be invested in Exchange Traded Commodity Derivatives (ETCDs) tied to silver.
Silver ETFs necessitate the fund house to store physical silver in vaults securely. However, the silver must adhere to stringent standards: it should be in 30 kg bars with a purity of 99.9%, as stipulated by the London Bullion Market Association (LBMA) Good Delivery Standard. The fund manager must conduct routine audits of the silver holdings, providing timely audit reports for transparency and accountability.
The NAV of silver ETFs is disclosed on many platforms during the trading day, and if you want easy access, you should purchase the ETF from Alice Blue online. To invest in the Silver ETF, you must open a Demat account.
Silver ETFs trade on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). In India, the benchmark for the silver ETF is the underlying asset’s price as determined by the LBMA’s daily spot-fixing.
Features Of Silver ETF
The features of silver ETF are:
- Alternative to physical silver
- Tracks silver price
- Low expense ratio
- Zero storage cost
- High purity
- Inflation-beating returns
- Highly liquid
- Low tracking error
- Helps with diversification
- Information availability
- Demand for silver in industries
- Professionally managed
Alternative to physical silver
Silver ETFs present an ideal alternative for investors seeking exposure to physical silver, given they’re backed solely by this precious metal. These ETFs eliminate concerns about purity standards and storage. Moreover, given their ease of trading on stock exchanges throughout the day, they offer superior liquidity compared to physical silver.
Tracks silver price
Silver ETFs track the silver price indicated by the London Bullion Market Association’s (LBMA) daily spot-fixing prices. Therefore, when the market price of silver rises, the returns or NAV of the silver ETFs also rise.
Low expense ratio
Silver ETFs typically have a low expense ratio due to their passive management style, which involves infrequent portfolio reallocation. This strategy results in lower charges for investors, with the expense ratio generally ranging between 0.4% to 0.5%.
Zero storage cost
There is zero storage cost involved in silver ETFs because the certificates are held in an online or dematerialized form. There is no need to store the physical silver in the bank lockers and pay the cost for it, which means holding silver ETFs is fully safe and secure.
High purity
In silver ETFs, the silver held in the secured vaults by the fund house as the underlying instruments are 99.99% pure in the form of standard 30 kg bars. Therefore, silver ETFs can be considered to be high-purity silver-backed instruments.
Inflation-beating returns
Silver ETFs can deliver returns that outpace inflation, as they are invested in silver, which can yield high returns during periods of increased industry demand. Precious metals like gold and silver have a historical precedent of providing substantial returns and are enduring investment options for Indian investors seeking secure investment channels.
Highly liquid
Unlike Mutual Funds, Silver ETFs are highly liquid because they can be traded throughout the trading days with the help of a Demat account when the market is open for trade.
Low tracking error
The silver ETF’s tracking error is exceptionally low, not surpassing 2% as specified by SEBI. The AMC must disclose this information on its website every six months. The tracking error represents the variance between the real price of silver and the NAV of the scheme.
Helps with diversification
Silver ETFs offer diversification benefits by investing in precious silver metals. These schemes typically provide returns not influenced by other stocks and bond fluctuations. As a result, they serve as an excellent tool for enhancing investment portfolios with a distinct instrument while mitigating risk.
Information availability
Silver ETFs provide all the information related to the market risk, liquidity, and fund manager details in their SID (Scheme Information Document). Hence, the investor has all the information before investing in silver ETFs, and they can make a strong decision.
Demand for silver in industries
Silver ETFs present a promising long-term investment opportunity primarily driven by the substantial demand from industries rather than individual investors. Silver’s extensive use in various sectors, such as automotive, telecommunications, and solar panels, holds significant value. Consequently, investing in silver ETFs becomes particularly favorable when these industries experience growth and expansion.
Professionally managed
Silver ETFs are overseen by seasoned fund managers with expertise in investing and navigating the commodity market. This professional management ensures that the ETFs consistently deliver strong performance, minimizing the risk of value depreciation over time.
Best Silver ETF In India
| S. No. | Silver ETF Scheme | NAV (Net Asset Value) | AUM (Asset Under Management) | 1-Year Returns | Returns Since Inception |
| 1. | Nippon India Silver ETF | ₹70.75 | ₹697.91 crores | 16.46% | 10.34% |
| 2. | ICICI Prudential Silver ETF | ₹73.21 | ₹699.44 crores | 17.38% | 6.91% |
| 3. | Aditya Birla Sun Life Silver ETF | ₹74.36 | ₹182.01 crores | 19.59% | 13.50% |
| 4. | DSP Silver ETF | ₹70.95 | ₹39.56 crores | 15.13% (6 months) | 26.67% |
| 5. | HDFC Silver ETF | ₹69.65 | ₹83.18 crores | 12.39% (6 months) | 34.2% |
| 6. | Kotak Silver ETF | ₹71.34 | ₹16.53 crores | 8.99% (3 months) | 4.7% |
Note: Data as of 19th May 2023
Gold Vs Silver ETF
The key difference between a gold ETF and a silver ETF is that the gold ETF has a lower expense ratio than the silver ETF. This happens because the gold has a lower storage cost due to lesser volume than storing the silver by the fund house.
Here are the points of difference between the gold and silver ETFs:
| Points of Difference | Gold ETF | Silver ETF |
| Purchasing cost | The total cost of purchasing the units of gold ETF is more because the price of gold is higher. | The total cost of purchasing the units of silver ETF is less because the price is lower. |
| Market volatility | Individual investors often prefer gold for long-term investments due to its stability, resulting in less volatility. As a result, investing in gold ETFs offers a more stable and predictable investment experience with minimal exposure to market fluctuations. | The market volatility of the silver ETFs is higher because the underlying instrument, silver, is demanded more by the industrial establishments for which the demand is highly fluctuating. |
| Liquidity | Gold ETFs are highly liquid because of the high demand and more trading volumes in the market. | As compared to gold ETFs, silver ETFs are less liquid because of the low demand and lower trading volumes in the market. |
| Returns | The returns provided by the gold ETFs are higher because of the high demand and price of gold. | The returns provided by the silver ETFs are lower because of the low demand and price of silver. |
| Hedge against inflation | Gold is not greatly influenced by market changes because it is in demand by individuals. As a result, when the economy grows, the demand for gold may or may not increase. This makes gold ETFs a potential hedge against inflation, even though the returns may be lower compared to other investments. | Silver is more sensitive to market changes because of industrial demand; hence, the demand for silver rises when the economy grows. Therefore, silver ETFs provide a much better hedge against inflation. |
| Helps in portfolio diversification | Gold ETFs are a better option for diversifying the portfolio because they correlate less with the stock market. | Silver ETFs are a good option for diversifying the portfolio because they have a moderate correlation with the stock market. |
| Demand and supply impact | Gold is less impacted by the demand and supply factors and is considered a good investment when the stock market is down. Therefore, gold ETFs are less impacted by demand and supply. | Silver is highly impacted by the demand and supply from metal and mining companies. Therefore, silver ETFs are highly impacted by demand and supply factors. |
Silver ETF Taxation
Starting April 1st, 2023, the income earned from silver ETFs is taxed based on the investor’s income tax slab. This rule applies to short-term and long-term capital gains and applies to mutual funds with less than 35% investment in equity instruments.
Silver ETF Returns
In 2022, silver ETF investments saw a remarkable growth of over 180%. As of March 2023, the total assets under management (AUM) for silver ETFs reached ₹1,792 crores. India is the third largest market for investing in physical silver, following Germany and the US.
Here are the returns details provided by different silver ETF schemes:
| S. No. | Silver ETF Scheme | 1-month returns | 3-month returns | 6-month returns |
| 1. | Aditya Birla Sun Life Silver ETF | -4.79% | 9.52% | 15.97% |
| 2. | Nippon India Silver ETF | -4.06% | 10.55% | 15.16% |
| 3. | DSP Silver ETF | -4.07% | 10.51% | 15.13% |
| 4. | ICICI Prudential Silver ETF | -4.07% | 10.57% | 14.13% |
| 5. | HDFC Silver ETF | -6.88% | 11.15% | 12.39% |
| 6. | Kotak Silver ETF | -4.03% | 8.99% | – |
Note: Data as of 19th May 2023
How To Buy Silver ETF In India?
Silver ETFs can be purchased easily via a registered stockbroker by opening a Demat and trading account like any stock. The steps to follow to buy silver ETFs in India are:
- Open Demat and trading account with a registered stockbroker such as Alice Blue by submitting the PAN card and Aadhaar card and completing the KYC process.
- Select from the list of silver ETFs based on your analysis and invest using a SIP or lump sum method.
- You can buy or redeem the silver ETF based on the current NAV (Net Asset Value) prevailing at that time.
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Silver ETF – Quick Summary
- Silver ETF is a type of exchange-traded fund that has to invest 95% of its assets into silver and related instruments. In India, silver ETFs have an underlying asset as silver for which the fund house has to store the units of 30 kg of silver bars having a purity of 99.99%.
- The main feature of the silver ETF is that it tracks the price of domestic silver which is indicated by the LBMA (London Bullion Market Association) daily spot-fixing.
- One of the best silver ETFs in India is the Nippon India Silver ETF which has provided an average return of 16.46% in the last year.
- When comparing the gold ETFs with silver ETFs, gold ETFs have high liquidity because of the higher demand than silver ETFs.
- Income from Silver ETFs is taxed according to the investor’s income tax slab and is independent of whether it is an STCG or an LTCG.
- Silver ETF has provided a high return in the last six months, and the Aditya Birla Sun Life Silver ETF offers the highest one.
- Silver ETF can be purchased with the help of a Demat account which can be opened with a registered stockbroker.
Silver ETF – Frequently Asked Questions
1. What is a silver ETF?
A silver ETF is an exchange-traded fund that invests at least 95% of the collected sum of money into physical silver and related instruments and replicates the performance of the silver.
2. Which silver ETF is best?
The best silver ETFs in India are:
- Nippon India Silver ETF
- ICICI Prudential Silver ETF
- Aditya Birla Sun Life Silver ETF
3. How can I buy silver ETF in India?
You can buy silver ETF in India through a Demat account which can be opened online with a registered stockbroker.
4. Is investment in silver ETF good?
Investing in silver ETFs can be a good choice because they are highly liquid and invest the sum in the 99.99% form of purest silver bars.
5. Is silver ETF taxable?
Yes, income from silver ETFs is taxable and is added to the “income from other sources,” which is taxed according to the investor’s income tax slab.
6. How many Silver ETFs are there in India?
There are, in total, seven silver ETFs in India as of March 2023, as mentioned by the AMFI.
7. Which is the oldest silver ETF in India?
The oldest silver ETF in India is ICICI Prudential Silver ETF which was launched on 21st January 2022 and has an AUM of ₹699.44 crores collected from various investors.
8. What is the benefit of silver ETF?
The benefit of silver ETFs is the ease of investing and storing because you can invest in them online using a Demat account, and the certificate can only be stored in that account.
