Investors who have long relied on the yellow metal are increasingly curious about its cheaper cousin. Those reading about Silver ETF options for the first time often discover that the white metal behaves quite differently from what they expected. A glance at the Tata silver ETF share price on a trading app shows a figure that moves with its own rhythm, shaped by forces that go well beyond jewellery and festivals. Understanding what drives this metal helps you decide whether it deserves a place in your portfolio.
A Metal With Two Personalities
This is primarily seen as a store of value. However, Silver has 2 uses – it can be seen as a precious metal used to make beautiful jewellery items, cutlery and gifts. But it can also be seen as an industrial commodity used in electronic items, solar panels, electric vehicle parts, medical devices and many manufacturing processes. This means its price can be influenced by investor demand and industry health.
During a booming factory environment and new technologies, increased demand will come from industrial buyers. However, during a slowing economy this effect will be reduced. This often means that the white metal can be far more volatile. During a positive economic climate it can see large increases in price and during a negative economic climate large drops.
Growing Clean Energy Industry and Tech
Due to India’s focus on using solar panels, electric vehicles and electronic manufacturing, there has been increased demand from industry. Due to the conductive nature of the metal it is used in solar panels. Modern vehicles also contain lots of electrical parts with this metal. This creates a solid base of demand which wouldn’t have been present a generation ago.
This doesn’t mean that there will be price increases. There is supply from mining, recycling and importing. Technology can mean less of this metal is required per product. However, the relationship with industry creates a positive growth story.
Volatility
As the white metal is a much smaller market, price movements can be larger. Over a week, prices can move much more than the traditional asset. If you’re used to having volatile equities in your portfolio this can be manageable. However, if you prefer stability then it is best to keep this small.
A basic rule is to keep this as a small portion of your balanced portfolio. Maybe a few per cent. This should be seen as an extra to your portfolio. You should never invest any money that you may need in the next year or two as if it goes down you’ll have to sell at a loss.
Buying Physical
Physical products such as bars, coins and cutlery can be troublesome to purchase. The metal is very heavy in value which means it takes up a lot of space to store. You also have to consider purity, making charges and re-sale discounts which all decrease the return. By investing in exchange traded units you won’t have these issues. Each unit represents a certain amount of bullion being held by a custodian. You can buy/sell this through your demat account during trading hours.
The custodianship, valuations and transparency are all regulated by SEBI. Monthly factsheets are published by the fund houses. The costs are an annual expense ratio, brokerage and bid/offer spread.
Before investing compare:
Expense ratios of the funds.
Tracking error against the domestic price.
Average daily volumes and spreads.
Fund size and history.
Taxation
Gains will be taxed depending on how long you’ve held the investment. These have been updated recently in the Union Budgets. Ensure you’re aware of the current situation either via official guidance or a chartered accountant. Be sure to keep your contract notes and statements safe. This shows when and at what price you bought.
Investing Wisely
The white metal provides a unique opportunity to have exposure to investor demand and industry growth. This can be exciting and volatile. To invest wisely invest regularly through monthly contributions. Keep it small and review annually. This should be treated as an extra to your equities, debt and traditional yellow investment. Having realistic expectations and being patient can provide some useful diversity to a strong portfolio.
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