Silver investment: how to invest in silver?

Is this the right time for a silver investment? Many investors are considering this question strongly, and looking to purchase silver online. For 29-year-old Karishma, who is an HR professional with a large MNC in Delhi, the stock market has been a friend since COVID. In 2020 and 2021, she found herself earning robust returns on her stock investments, and even managed to accumulate a solid portfolio of 20-30 well-performing stocks. Come 2023, and the volatility of the market caught her unawares. From the continued turmoil in Ukraine, to the ongoing war between Israel and Hamas, from the euphoria during India’s G20 presidency, to the damning Hindenburg report on Adani group stocks, the market dealt with a slew of surges and plunges which caused whiplash among market watchers and investors.

In this scenario, Karishma has been feeling the pressing need to add a safe haven asset to her portfolio and accordingly, she has been thinking whether or not to invest in silver online. While the market includes a variety of mutual funds such as equity fund, debt funds and hybrid funds, and can be invested in by way of SIP or systematic investment plan, do you know about silver mutual funds? Here is all you need to know before beginning your silver investment.

Ways to invest in silver

Investing in silver can be approached through various means, each with its own set of advantages and risks, beginning with silver coins or bullion. While owning physical silver provides tangible possession and usability and can yield profits if silver prices rise, it lacks cash flow generation. Buying from reputable sources is crucial to avoid overpaying, and storage and security are considerations. Impurities may affect resale value, and collectible coins may have added costs. The second possibility is investing in silver futures, wherein futures contracts allow speculation on silver price movements without owning physical silver. Leverage in futures can amplify gains and losses. A small capital outlay can control a large position, but it may lead to rapid losses if the market moves unfavourably.

You can also invest in a silver ETF or Exchange-Traded Funds, which own physical silver and provide exposure to silver price movements without the hassles of ownership. ETFs can be easily traded on stock exchanges, offering liquidity. The fourth option involves investments in silver mining stocks wherein the rising silver prices can boost earnings, even as miners may increase production over time. However, individual company analysis is essential to choosing reliable stocks and these can be volatile due to their dependency on silver prices. Finally, for diversification and reduced risk, ETFs that hold a basket of silver mining stocks can be considered. They provide exposure to multiple mining companies while minimising the impact of poor performance by any single firm.

Is silver investment a good idea?

Yes, silver investment is a good idea as it is an excellent way of diversifying your portfolio and gaining exposure to a precious metal. Additionally, the metal has been known to outperform even equities, during volatile markets, making it a safe haven asset, while also being a store of value, given that its price and value trend upwards with time, especially during high inflation scenarios. Many silver assets, such as a silver ETF, tend to be highly liquid, making them a flexible investment option. The asset class indicates low correlation to other markets, including stocks and fixed income, making it an attractive addition to your portfolio. 

Is this the right time for a silver investment?

Yes, this is an opportune time to undertake a silver investment, because of a variety of reasons. First of all, the turbulence being experienced by the market has increased the demand for portfolio diversification, and given its lower price, when compared to gold; silver can be an excellent addition to a well-diversified portfolio. Further, in the ongoing high inflation scenario, your silver investment has the power to maintain its value over the longer term, thus offering you a decisive hedge against rising prices.

Silver is also a limited commodity – while it has found application in a bevy of industries, its availability and production is limited, making it extremely precious. As the demand for electronic devices and other use cases rise with time, the price of silver will also witness a consequent hike, placing your silver investment in an optimal position for earning superlative returns. It is advisable to invest in silver via liquid and electronic means such as silver ETFs, as these help you avoid purity pitfalls as well as storage expenses. You can consider silver ETF investments for the longer term, since commodity prices tend to show strong volatility in the shorter term, causing stress to risk-averse investors.

Given the varied benefits of a silver investment, and her need to diversify her portfolio, Karishma decided to invest a lumpsum amount in a silver ETF, while following up the same with a monthly SIP. Not only would this enable her to mitigate the risk potential and maximise the returns on her portfolio, but it would also offer her a safe haven during volatile markets, making it a win-win situation. If you are in a similar investing conundrum, this is the right time for you also to start building positions in the gleaming metal.

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