Silver is another precious metal that comes to our mind (the first being gold) when we think of investing in bullion or precious metals. Investors who wanted to invest in silver can now rejoice this year, since, after years of wait, there finally is an option to invest in silver digitally- by the way of Silver ETFs or mutual funds. In this post, we will review the best silver mutual funds in India. You can also check out our review of other interesting opportunities in our blog
Why invest in silver digitally (and not in physical silver)
There are several advantages of investing in silver digitally (via ETFs or mutual funds) as compared to physical silver bars and coins. Some of them are as follows:
- No risk of theft- With ETFs or MF units, there is no risk of theft compared to physical bars and coins. Also in case of death of the unit holder, your holdings can be claimed by the registered nominee.
- Issues of storage space- No special lockers or safes are required to store your silver.
- Purity- No need to get purity checked for silver you are buying from a local jeweler.
- Low minimum investment- Investments in silver MFs can start from as low as Rs.100 and in Silver ETFs from 1 unit (around Rs.60). No need to buy coins and bars of fixed weights.
- Easy selling options- Need to liquidate your silver holdings or book profit? Jewelers typically take a cut of 10-20% while buying silver. Selling your digital silver holdings is all a task of 4-5 clicks!
- Saving making charges- Most brands take 5-10% making charges for bars and coins too. When selling your physical silver, you lose out on it. No such worries with ETFs or MFs.
Silver Exchange Traded Fund (or Silver ETF) is an exchange-traded fund that invests primarily in physical silver. The assets need to be held with a third-party trust or custodian and physical verification is done at regular intervals confirmation by auditors.
Silver ETFs can be purchased using a demat and a trading account- just like you purchase any normal stocks. For a long time now, India had only gold ETFs (in precious metals). However, since the beginning of 2022, three organizations have launched silver ETFs in India. They are as follows:
Nippon India Silver ETF
Launched On: Feb 01, 2022
Benchmark: Domestic Price of Silver Index
Assets: ₹ 349 Cr (As on 30-Jun-2022)
Expense: 0.59% (As on 31-May-2022)
ICICI Prudential Silver ETF
Launched On: Jan 21, 2022
Benchmark: Domestic Price of Silver
Assets: ₹ 465 Cr (As on 30-Jun-2022)
Expense: 0.40% (As on 31-May-2022)
Aditya Birla Sun Life Silver ETF
Launched On: Jan 28, 2022
Benchmark: Domestic Price of Silver
Assets: ₹ 110 Cr (As on 30-Jun-2022)
Expense: 0.37% (As on 31-May-2022)
Silver Mutual Funds in India
Silver mutual funds in India are those mutual funds that invest in silver ETFs of their respective AMCs. They generally invest a very significant portion of the corpus in silver ETFs while keeping a tiny portion in cash/debt instruments to maintain liquidity and handle redemptions. The advantage of opting for silver mutual funds over ETFs is no requirement of a demat/trading account. You can simply invest directly with mutual funds and also set up SIPs.
Best Silver Mutual Funds in India
#1 ICICI Prudential Silver ETF Fund of Fund
This was one of the first launched silver mutual funds in India. This fund invests in units of ICICI Prudential Silver ETF. The fund is managed by Manish Banthia & Nishit Patel. The minimum investment amount for 1st investment is Rs.100 and even for SIP, the monthly minimum amount is Rs.100. The expense ratio is around 0.09% for the direct-growth plan and has an exit loan of 1% applicable if redeemed within 15 days of investment. The fund has given a negative return of around 8% since its inception in January 2022- primarily due to the steep decline in prices of silver worldwide.
#2 Nippon India Silver ETF Fund of Fund
This fund invests in units of Nippon India Silver ETF. The fund is managed by Mr. Mehul Dama since its inception. The minimum investment amount for starting investments in this fund is only Rs.100. For SIP too, the monthly minimum amount is Rs.100. The expense ratio is around 0.13% for the direct-growth plan and has an exit loan of 1% applicable if redeemed within 15 days of investment. The AUM of the fund at the time of writing the article is around 158 Cr. The fund has given a negative return of around 8%- almost similar to the whole category of silver mutual funds- as prices of silver have fallen significantly in recent times globally.
#3 Aditya Birla Sun Life Silver ETF Fund of Fund
This fund is being run by Aditya Birla Sun Life AMC and invests in units of Aditya Birla Sun Life Silver ETF. The fund is managed by Mr. Lovelish Solanki & Mr. Pranav Gupta since inception. The minimum investment amount for starting investments in this fund is only Rs.100. For SIP too, the monthly minimum amount is Rs.100. The expense ratio is around 0.1% for the direct-growth plan and has an exit loan of 0.5% applicable if redeemed within 30 days of investment. This fund has the lowest AUM out of the 3 funds mentioned here- around Rs.63 Cr at the time of writing this article. The fund has returned negative returns since its inception of around 8% just like other funds in this list- all due to a fall in silver prices in recent times.
Taxation on Silver Mutual Funds
Silver mutual funds are treated similarly to non-equity funds when it comes to taxation. If you redeem your mutual fund units before 3 years, you need to pay tax as per your tax slab on your gains. If held for more than 3 years, you need to pay long-term capital gains tax with indexation benefit.
We hope all your queries about Best Silver Mutual Funds in India got answered in this post. Silver is a precious metal and has industrial uses as well. One can think of investing a small portion of their portfolio in silver- via physical mode, ETFs, or Mutual Funds as per individual performance. Silver displays much more volatility as compared to gold. So plan your entry and exists accordingly or invest regularly in case you are a long-term investor.