Silver funds lose 6.48% in one month. What should investors do?

Silver funds, mutual fund schemes dedicated to investing in silver, lost around 6.48% in one month, according to the ACE MF database. These commodity schemes have lost around 2.57% in three months. However, they have offered an impressive 20.60% in one year. These ETFs are new entrants to the mutual fund space and have been in the market since 2022. There are around 16 silver funds in the market, with six schemes that have completed one year in the market.

HDFC Silver ETF lost the most at around 7.99%, followed by Aditya Birla Sun Life Silver ETF which lost 7.15%, and Axis Silver ETF that lost around 7.04%. Most schemes lost around 6% in one month.“The price trend in silver in the recent past has been in line with other asset classes like equity and gold. Since silver is both an industrial and precious metal, the price gets impacted by the industrial demand trends. With China’s economic meltdown and US rating downgrade, the silver metal is under pressure due to worries around demand outlook,” says Chintan Haria, Head Investment Strategy, ICICI Prudential Mutual Fund.

In the three month horizon, the schemes lost around 2.57%. Aditya Birla Sun Life Silver ETF lost the most of around 4.01%. In nine months, the schemes have offered double-digit returns of around 12.65% and 20.60% in one year horizon.

What strategy should you follow if you have investments in these funds? “The allocation to silver should be as per one’s asset allocation requirement. It is best to consult a financial advisor to decide on the allocation. A price correction alone should not be the reason to relook at the allocation made,” says Chintan Haria.

The schemes are benchmarked against CRISIL Composite Bond Index, and NIFTY 50. CRISIL Composite Bond Index, and NIFTY 50 lost 0.06% and 1.76% in one month horizon.

So if you are interested in investing in silver funds, what are the things you should keep in mind? “Nearly 60% of the global silver consumption is for industrial purposes. The metal is used extensively in green energy technologies. Green energy transition and the evolution of EV will continue to drive demand for silver. However, in the near term, the silver price will be influenced by how the economies in the advanced nations pan out,” added Haria.

Gold and silver funds are used for portfolio diversification. If you have a large portfolio, you can earmark a small percentage of the total portfolio (advisors say around 10%) to invest in gold and/or silver. If you are starting out or you have a very small portfolio, you can give it a miss. Investors should remember that these funds wont offer you greater returns year after year. They are supposed to offer you diversification and add stability to your portfolio.