Silver ETFs or exchange traded funds are relatively new and have to pass the test of time and investors willing to increase exposure in this instrument must do it with caution, personal finance expert Jitendra Solanki told ETMarkets.
While Silver ETFs offer an additional avenue for investment in silver, they are not as popular as their counterpart Gold ETF, Solanki added.
Silver ETFs invest nearly 95% in silver which is the underlying asset.
Physical Silver Vs MCX Silver Futures Vs Silver ETFs
However, Silver ETFs are much better than holding silver in the physical form and have several advantages over the latter, he said.
They do not run the danger of being impure and there is no requirement of owning it in a physical form and storing it, he explained.
Silver ETFs also have an advantage over SIlver futures which are also traded on the exchanges. The former is traded on exchanges in the form of stocks, Solanki said. Trading in silver futures and for that matter any derivative is complicated while ETFs are much simpler to understand, he added.Moreover, the minimum threshold or buying quantity in case of Silver futures is 1 kg, while in Silver ETF the minimum investment amount is the NAV value, another expert Anuj Gupta informed. Investments in Silver ETF can be made at a significantly lower amount, Gupta pointed out.
Silver futures are more suited for the purpose of trading while one can buy units in Silver ETF and leave it in his demat account for a long period, Gupta said.
Silver ETF Returns
The returns given by Silver ETFs has been less than inspiring as their underlying asset (silver) has been an underperformer. Gupta said despite the current rally in bullion, silver is still in the red and has given negative 1.12% returns on the year-to-date basis, Gupta. As for the international prices, this precious metal is trading 6.5% lower on the YTD basis, the IIFL Securities expert informed.
IMAGE: ETF
Source: ET Mutual Fund Screener
ET Mutual Fund Screener: We have collated Silver ETFs currently available in the market along with their returns:
DSP Silver ETF – Growth Fund
The Current Net Asset Value (NAV) of the DSP Silver ETF as of March 17, 2023 is Rs 66.24 for the Growth option of its Regular plan. Its trailing returns over different time periods are: 3.63% (since launch). The expense ratio of the fund is 0.55% for Regular plan as on Aug 31, 2022. The DSP Silver ETF currently holds Assets under Management (AUM) worth Rs 19.51 crore as on September 30, 2022.
Nippon India Silver ETF – Growth Fund
The Current NAV of the Nippon India Silver ETF as of March 17, 2023 is Rs 66.04 for the growth option of its Regular plan. Its trailing returns over different time periods are: -7.17% (since launch). The expense ratio of the fund is 0.51% for the Regular plan as on August 31, 2022. Minimum investment required is Rs 1000 and minimum additional investment is Rs 0. The Nippon India Silver ETF currently holds Assets under Management worth of Rs 520.13 crore as on September 30, 2022.
ICICI Prudential Silver ETF – Growth Fund
The Current NAV of the ICICI Prudential Silver ETF as of March 17, 2023 is Rs 68.34 for the Growth option of its Regular plan. Its trailing returns over different time periods are: -9.62% (since launch). Minimum investment required is Rs 100 and minimum additional investment is Rs 0. The expense ratio of the fund is 0.4% for the Regular plan as on August 31, 2022. The ICICI Prudential Silver ETF currently holds AUM worth of Rs 559.83 crore as on September 30, 2022.
Aditya Birla Sun Life Silver ETF Regular – Growth Fund
The Current NAV of the Aditya Birla Sun Life Silver ETF as of March 17, 2023 is Rs 68.73 for the Growth option of its Regular plan. Its trailing returns over different time periods are: -5.13% (since launch). Minimum investment required is Rs 500 and minimum additional investment is Rs 0. The expense ratio of the fund is 0.37% for the Regular plan as on August 31, 2022. The Aditya Birla Sun Life Silver ETF currently holds AUM worth of Rs 147.06 crore as on September 30, 2022.
Taxation on Silver ETFs
Solanki’s advice to investors is to hold Silver ETF units for long periods to avail benefits of Long Term Capital Gains (LTCG) tax. He said that short-term gains made on selling Silver ETFs will be added to your income and will be taxed in accordance with your income tax slab rate.
On holding it for 3 years, gains from Silver ETF will be treated as long-term and will be taxed at 20% plus the indexation, Solanki said .
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
