Radhika left the following message a few days ago, and I thought this was an interesting topic for a post.
Can you please explain the reason for the increasing importance of silver and why people are advising you to buy more silver now as it will be an important investment for the future? How did the importance shift from gold to silver? Also, what is the best way to invest in silver?
In the US, the silver ETF – SLV has gone down by almost 30% in the last 12 months, and in India, silver price is down about 20% in the last year or so.
The popularity of silver, or rather the higher imports (in terms of volume) is real though and silver imports rose by 180% in 2013.
These high imports are attributed to the increasing use of silver in jewelry as gold prices rise, and is very different from the rise in the demand for gold since that was mainly for investment purposes.
Nothing has changed in the economic environment in the past few years to make me feel that silver should have a place in my portfolio, and it is only fair that I mention here that I was wrong about gold for a long time, so there’s really no reason for you to listen to me about silver.
However, if you do wish to know my view, I feel that gold may have a small part in your portfolio, mainly as a hedge against the depreciating Rupee, but I don’t see where silver fits in, and what purpose that serves. And for Indians, there isn’t really a good way to invest in silver either.
For some reason there has been no silver ETF in India, and I think that is a major disadvantage for Indians since I believe ETFs are the best way to invest in gold and silver. You don’t have the hassle of worrying about purity or of incurring heavy commissions while selling your gold or silver bars, and of course you don’t have to worry about its physical protection either.
Given that this great option is not available, what are the other ways possible to buy silver for Indians?
How can Indians buy silver online?
Buy US Silver ETFs by enabling overseas trading in your brokerage account
About a few years ago, Indians were allowed to invest in overseas ETFs, and shares, and there are several US silver ETFs that are available to Indians who have activated this feature on their brokerage account. So, this is one novel way of getting exposure to silver for Indians. The only additional thing you have to consider is that when you invest in any of these US based funds, not only are you taking a position in the fund, you are taking a position on the USD-INR rate also because the exchange rate will affect your returns.
Buy a Silver Futures Contract on the Commodity Exchange
You can buy a silver futures contract at the commodity exchange, and this will give you a way to get exposure to silver online. However, these futures contract are shorter term in nature, and since silver is a relatively volatile commodity, I wouldn’t recommend going this route to investors. This is a good way to speculate but if you are looking to include silver as part of your portfolio, then this is not really the way to do it.
As far as I know, there aren’t any other safe and viable online ways invest in silver online.
Buy Silver Bars
I think not a lot of people will have an appetite for the two options mentioned above, and if you fall under that category then you can look at just buying silver bars from a jeweler or maybe a bank. The big issues with buying gold or silver from a jeweler is how they deduct money when they buy it back from you, and it can be a big hassle. One way to avoid this that commonly comes up when we discuss gold bars is to exchange that with jewelry and in that way don’t incur these losses, but I don’t know how far that is possible when it comes to silver.
My personal opinion is that there’s really no place for silver in my portfolio, and I don’t see any strong rationale to get into silver positions. If you want to hedge against Rupee depreciation, or inflation, then buying foreign stocks, and gold may be a much safer alternative especially given how limited the current options to buy silver are. If you want to invest in silver, I’d say this should be in limited quantities as silver has been quite volatile in the past, and you don’t want to expose yourself to that volatility too much.