Silver prices hit a record high in India, surpassing Rs 82,000 per kilogram for the first time. The metal has given 13% returns in the last three months. The surge could be driven by multiple factors, including increased global demand, investment appeal and fluctuations in the exchange rate.
The metal is used across industries like electronics, solar power, and healthcare. Apart from this, geopolitical tensions could have affected sentiment, spurring demand as people look to protect their wealth.
With such a surge, silver exchange-traded funds are one avenue that investors can consider to put their money to use. They typically invest in physical silver, futures, contracts, or stocks of silver mining companies.
Here is a look at how they work.
How Do Silver ETFs Work?
Silver ETFs work like a stock that can be bought in the markets. Its worth goes up and down, depending on how much silver is worth.
To follow silver prices, the ETF uses derivatives, like futures contracts or swaps. ETF managers buy these derivatives to stay connected to silver's price changes.
Types Of Silver ETF
Physically-Backed Silver ETF
These are like savings accounts for silver. They buy actual silver and keep it safe in a vault. Investing in this ETF is basically like buying a share of the silver. So, if the price of silver goes up, the value of the share goes up too.
Futures-Based Silver ETF
Instead of buying real silver, these ETFs make bets on what the price of silver will be in the future. They do this by buying contracts that say they'll buy or sell silver at a certain price later on. As these contracts expire, the ETF gets new ones to keep betting on the silver price.
Investing in these types of ETFs is like betting on the price of silver, rather than owning it.
How To Invest In Silver ETF In India?
Investors can follow these steps to invest in silver ETFs:
Choose a broker that allows trading in silver ETFs. A slew of brokerages like Angel One Ltd., Groww, DSP Mutual Fund and Mirae Asset, among others, allow trading in silver ETFs.
Choose the ETF to investment in. Some of them are: Nippon India Silver ETF–Growth, Kotak Silver ETF FoF Regular, UTI Silver ETF–Growth, UTI Silver ETF FoF Regular–Growth, and ICICI Prudential Silver ETF–Growth.
Lastly, investors can choose if they want to do SIP or one-time investment and place the order.
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