Silver ETF NFO: Should you Invest?

Investment Objective :

To generate returns that are in line with the performance of physical silver in domestic prices, before expenses, subject to tracking errors.

What will the ETF invest in?

ETF would invest in physical silver and silver-related instruments and the performance of the scheme will be benchmarked against the domestic price of silver (based on LBMA Silver daily spot-fixing price). Physical silver will be of 99.9 percent purity (999 parts per thousand) conforming to London Bullion Market Association (LBMA) Good Delivery Standards.

Upcoming Silver ETFs:

NFO	Open Date	Close Date
ICICI Prudential Silver ETF	January 05, 2022	January 19, 2022
Nippon India Silver ETF	January 13, 2022	January 27, 2022
Aditya Birla Sun Life Silver ETF	January 13, 2022	January 27, 2022

What’s different about Silver?

Links with economic activity:

Gold although is a good hedge against inflation and forex risks, it has limited uses beyond jewelry and investment purposes. However, on the other hand, Half of all silver is used in heavy industry and high technology, including smartphones, tablets, automobile electrical systems, solar-panel cells, and many other products and applications which makes it sensitive to economic cycles and economic activity This makes Silver a good tactical bet on economic recovery.

More volatile than gold:

The volatility in silver prices can be two to three times greater than that of gold which carries a greater downside for portfolios

Is it a better diversification bet than gold?

No, gold has been consistently uncorrelated with other major asset classes. The risk of silver underperforming during economic downturns due to its industry-linked usages outweighs the weak but still positive correlation with other asset classes

MoneyWorks4me Opinion:

Investing in silver through an ETF, has its benefits of low-cost hassle-free storage, no risk of theft, investing in small denominations, easy liquidity as against physical silver.

If you wish to diversify your portfolio and hedge inflation, forex, and economic downturn risk, you are better of sticking to Gold ETFs/Sovereign Gold Bonds/Physical gold bars as a hedge as against Silver.

We believe that if you are sufficiently invested in equity and Gold, you can avoid investing in this NFO.