What is silver ETF, how does it work and how to invest? Explained simply

Silver has always been a popular choice for investors looking to diversify their portfolio. But instead of buying physical silver bars or coins, investors today have an easier option - Silver Exchange Traded Funds (Silver ETFs).

Like any investment, it’s important to understand the risks and do proper research before investing in silver ETFs. (Representative image/Unsplash)

What are silver ETFs?

Silver ETFs offer investors the opportunity to gain exposure to the silver market without the complexities of handling physical silver. They are basically funds that track the price of silver and are traded on stock exchanges similar to stocks.

Silver ETFs aim to mirror the performance of silver prices, providing a cost-effective and convenient way to invest in silver. In India, silver ETFs are required to maintain a purity of 99.9% for the silver they hold as per Securities and Exchange Board of India (“SEBI”) regulations.

How do silver ETFs work?

A silver ETF is a passively managed fund, meaning it simply tracks the domestic market price of silver. The fund’s Net Asset Value (NAV) changes based on the spot price of silver in the market. So, when silver prices rise, the value of your investment increases, and when prices fall, the value may drop accordingly.

Once listed on stock exchanges, investors can buy or sell units of the silver ETF just like shares. This makes it easier to enter or exit an investment at any time during trading hours, providing high liquidity.

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How to invest in silver ETFs in India?

Investing in silver ETFs in India is simple. You can buy them through your Demat or trading account with any registered broker. Since they are listed on Indian stock exchanges, you can trade them like any other listed security.

Who should invest in silver ETFs?

Silver ETFs can be an attractive option for various types of investors, including those seeking portfolio diversification, exposure to precious metals or growth-oriented investors.

In simple terms, silver ETFs offer a convenient, safe, and cost-effective way to gain exposure to silver without the hassle of storage or security concerns. They also help diversify an investment portfolio. However, like all market-linked products, it is important to understand the risks and do proper research before investing.

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