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Factors to be considered before investing in Silver ETFs





On January 13, 2022, three fund houses plan to launch two silver ETFs and three silver ETF fund of funds (FoF). Each of Aditya Birla Sun Life MF, Nippon India MF, and ICICI Prudential MF will introduce a silver ETF and FoF.


With their investments, both ETFs will attempt to match the return on physical silver prices in their home countries. Additionally, the schemes can engage in ETC Derivatives (ETCDs) based on silver as an underlying asset. The parent company's silver ETF will be the investment vehicle for the silver FoFs. Before you invest in them, here are a few things to keep in mind.


Dual Qualities

Silver possesses both precious metal and industrial metal properties. Industrial demand accounts for more than 50% of silver demand. This complicates the investor's decision to invest in silver and almost certainly results in the metal having a larger volatility than gold.


High Volatility

Silver's volatility is higher than gold's since it is an industrial metal. While silver has historically outperformed gold during moments of economic boom, when industrial demand rises silver has underperformed gold. Historically, gold has been more popular as a safe haven asset, whereas silver has been more popular for its industrial use.


No Correlation With Equity

With no correlation to other investments like stocks and bonds, silver lowers the total risk of a portfolio. The metal is a superb inflation hedge and a good diversifier of investment portfolios. Over a longer length of time, it outperforms gold in terms of returns. Experts recommend that investors diversify their portfolios by taking a small amount of silver exposure. It's not a good idea to put it at the heart of your portfolio.




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