Benefits & Risks of Silver ETF investment: Is it right for your Portfolio?

New Delhi: When it comes to investing in precious metals, gold is usually the most talked about. But in recent times, silver has also started attracting investor attention, especially due to its industrial demand and the possibility of price growth. Buying physical silver sounds good, but it can be a bit difficult to maintain, store and worry about its purity. This makes silver ETFs an easy and sensible option, where you can invest in silver without having to own it. Now let's know what a Silver ETF is, how it works and whether it should be included in your investment portfolio.

A silver ETF is a mutual fund that follows the price of silver and is traded on the stock market. Instead of buying silver bricks or coins, you buy units of ETFs that reflect the value of silver. That is, if the price of silver increases, then the value of your ETF also increases. Simply put, Silver ETF allows you to invest in silver without worrying about storage, security and purity, and you can easily buy and sell it with a demat account.

When you buy ETF units with a demat account, your money is invested in silver or its associated instruments. If the price of silver increases, the value of your ETF will also increase and if necessary, you can sell it in the market at any time. For example, if you bought 100 units at Rs 70 per unit, that is, you invested Rs 7000. In which, if the price of silver increases by 10%, then your ETF can also be around Rs 7700.

Silver ETF is especially beneficial for investors who want to start investing with a low amount. While physical silver requires buying at least a few grams, in ETFs, you can start with a few hundred rupees. This is the reason why its craze is increasing among young investors and the new generation. The biggest feature of Silver ETF is its liquidity. You can buy and sell it anytime in market hours. Also, the price is absolutely transparent as it is directly linked to the market rate. This completely eliminates the risks associated with storage, theft and purity.

Silver ETFs also come with certain risks. Silver prices may fluctuate sharply because it is used in industrial areas. Moreover, the returns of the ETF may show a slight difference (tracking error) from the actual market price and you cannot demand physical silver by buying silver through an ETF. Nevertheless, experts believe that it can be a good option for medium and long-term investors. This diversifies the portfolio and also helps in preventing inflation.