Looking for a smarter way to invest in silver—without the hassle of physically buying, storing, or insuring the metal? That’s where Silver ETFs come in. These are exchange-traded funds designed to track the price of silver and are traded on stock exchanges, just like stocks.
In 2024, Silver ETFs have emerged as one of the top-performing asset classes, delivering impressive gains of nearly 19.7% year-to-date and a massive 21% surge over the last three months. This performance has made them a popular choice for investors seeking returns from commodities without holding the physical asset.
If silver’s recent performance caught your eye, it’s worth exploring how it fits into a larger, goal-oriented investment plan. Precious metals can add strength, but true stability often comes from blending them with mutual fund strategies tailored to your risk profile.
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Silver ETFs primarily invest in high-purity physical silver, offering a way to gain exposure to this precious metal while eliminating the practical issues of physical ownership. In this article, we’ll dive deep into how Silver ETFs work, their features, tax treatment, SEBI regulations, pros, cons, and how they compare with other investment avenues.
And while silver is just one piece of the puzzle, building a strong, diversified investment strategy often includes exposure to mutual funds too. Pairing precious metals with equity or debt-based funds can help balance risk and reward over the long term.
Pairing Silver ETFs with mutual fund investments can create a well-rounded portfolio that’s both resilient and growth-ready. While silver offers protection and returns during market shifts, mutual funds deliver broader, long-term exposure across asset classes.
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What are Silver ETFs?
Silver ETFs—or Silver Exchange Traded Funds—are investment funds that track the market price of silver. They typically invest in physical silver bars that meet the London Bullion Market Association (LBMA) standards—specifically, 30 kg bars with 99.9% purity.
SEBI guidelines in India mandate that Silver ETFs invest only in:
- Physical silver (99.9% purity)
- Exchange-Traded Commodity Derivatives (ETCDs) with silver as the underlying, up to 10% of the fund’s Net Asset Value (NAV)
The fund house is also required to store silver safely with a SEBI-registered custodian and follow investment restrictions. A small portion of the pooled funds may be placed in short-term deposits with scheduled commercial banks, but the core focus remains on silver.
So, when you invest in a Silver ETF, you’re essentially buying units of a fund that holds real silver. This helps you benefit from changes in silver prices without needing to manage the logistics of physical ownership.
How does a Silver Exchange Traded Fund work?
The working of a Silver ETF is fairly straightforward—it mirrors the spot price of silver in the market. As the price of silver rises or falls, the Net Asset Value (NAV) of the Silver ETF moves accordingly.
Here’s what happens behind the scenes:
- Fund managers purchase physical silver and ensure it is securely stored.
- Investors buy and sell units of the ETF on the stock exchange, just like stocks.
- The value of these units fluctuates based on silver prices in the global market.
If you want to invest, you can do so through any trading platform where the ETF is listed. You don't need to worry about purity, security, or storage. It’s a convenient way to gain exposure to silver with liquidity and transparency, making it ideal for modern investors.
Features of Silver ETFs
Silver ETFs come with a set of practical advantages that make them a compelling alternative to buying physical silver. Let’s break down what sets them apart:
- High purity: When you invest in physical silver, you might worry about quality or authenticity. But with Silver ETFs, that concern disappears. These funds invest in silver that’s 99.99% pure, matching global standards.
- No storage hassle: Unlike physical silver, there’s no need to think about where to store it or how to keep it safe. The fund takes care of all that behind the scenes.
- Inflation hedge: Precious metals like silver tend to retain their value during inflationary periods. Investing in a Silver ETF can help protect your money’s real-world buying power.
- Portfolio balance: Silver has a low correlation with stocks and bonds. Adding Silver ETFs to your portfolio can reduce overall volatility and help you stay more stable in rough markets.
In essence, Silver ETFs offer a smart, efficient way to participate in silver’s market potential—without the baggage of physical ownership.
Types of Silver ETFs
Silver ETFs come in two primary types, each giving investors exposure to the metal in different ways:
1. Physically-backed Silver ETFs
These ETFs actually hold physical silver in secure vaults. When you invest in this type of ETF, you’re essentially owning a slice of that physical silver. These funds aim to closely follow the spot price of silver, meaning their value moves almost in sync with real-time silver prices.
Physically-backed Silver ETFs are preferred by investors who want direct exposure to silver, without holding it in their hands.
While Silver ETFs offer a way to invest in silver without the hassle of physical ownership, mutual funds provide a broader investment strategy with diversified exposure across various asset classes. Whether you're aiming for stability, growth, or risk management, the right mutual fund can help you build wealth effectively. INVEST NOW and create a portfolio tailored to your financial goals!
2. Futures-based Silver ETFs
Instead of owning real silver, these ETFs invest in silver futures contracts—financial agreements to buy silver at a future date. Since these contracts expire, fund managers must continually buy new ones to maintain silver exposure.
While these ETFs may not mirror the exact spot price of silver like physically-backed ones, they offer more flexibility and are often used by traders and investors looking for short-term plays.
Both types have their uses. Your choice depends on whether you prefer long-term stability or short-term tactical exposure.
Why Invest in Silver ETFs?
So, why are more investors considering Silver ETFs in 2024 and beyond?
- Quick entry and exit: Unlike buying physical silver, where you may deal with jewellers or dealers, Silver ETFs can be bought or sold on the stock exchange instantly, just like shares.
- Assured purity: You’re investing in globally recognised, hallmarked silver. That’s 99.99% purity without the trust concerns that often come with physical purchases.
- Inflation protection: Silver’s value tends to hold up well when prices rise elsewhere. It acts as a cushion against inflation.
- Diversification benefits: Including silver in your portfolio can reduce your dependence on equity or debt markets alone. It helps in spreading your risk.
- No storage cost: Storage and security are handled by the fund. You save on vault charges and insurance.
- High liquidity: There’s strong market demand for silver due to both investment and industrial uses. This keeps Silver ETFs fairly liquid meaning you can buy or sell easily.
Whether you're looking for a long-term hedge, a way to offset market volatility, or just want exposure to a hard asset without the physical burden—Silver ETFs provide a modern, practical route to invest in this timeless commodity.
Why You Should Invest in Silver as an Asset Class
Silver isn’t just a shiny metal—it’s an evolving investment opportunity. While it's long been valued in India for jewellery and wealth storage, its importance has expanded globally due to growing industrial demand.
From electric vehicles and solar panels to smartphones and medical devices, silver is now a key component in technologies that are shaping the future. This means that beyond being a store of value, silver has real-world utility—and that drives long-term price potential.
Another major advantage? Silver doesn’t move in tandem with stocks. So when markets turn turbulent, silver can help bring balance to your portfolio. That’s why many investors are starting to view silver not just as a metal, but as a strategic asset class that can offer both safety and growth potential.
Taxation of Silver ETF
Before you invest, it’s important to know how your gains will be taxed. Silver ETFs are classified as non-equity assets under Indian tax laws, which means the tax treatment differs from that of equity mutual funds or stocks.
Here’s how it works:
- Short-Term Capital Gains (STCG): If you sell your Silver ETF units within 36 months of purchase, the gains are added to your income and taxed according to your personal tax slab.
- Long-Term Capital Gains (LTCG): If you hold them for more than 36 months, your gains qualify for long-term tax treatment. You’ll be taxed at a flat rate of 20% with indexation benefit, which adjusts for inflation and lowers your effective tax burden.
It’s always a good idea to factor taxes into your investment decisions, as they can significantly impact your net returns over time.
How Are Investments in Silver Exchange Traded Funds Taxed?
Let’s go a step deeper into tax implications. Silver ETFs follow a structure similar to debt mutual funds. Your holding period plays a key role in determining the tax you’ll pay.
- Held for less than 3 years? That’s short-term. You’ll pay income tax based on your slab rate. If you’re in a higher bracket, this can eat into your returns.
- Held for more than 3 years? That’s long-term. The gain is taxed at 20%, but you also get the benefit of indexation—this means your original investment is adjusted for inflation, so you’re taxed only on the real gain.
Understanding this distinction helps in making smarter decisions—especially if you’re planning to hold Silver ETFs for the long run. The longer you stay invested, the more efficient your taxes become.
Silver ETFs as a Means of Diversification
If your portfolio only includes equities or traditional fixed income options, you could be exposing yourself to more risk than you realise. Silver ETFs offer an easy way to diversify without the complications of buying physical silver. Why does this matter? Because diversification reduces the impact of market volatility.
During times of market stress, precious metals like silver often move in the opposite direction of equities. This gives your portfolio some much-needed balance. And since silver is used across industries—from electronics to medicine—it enjoys steady demand, giving it long-term value potential.
Including silver ETFs in your asset mix means you're not betting everything on one asset class. You’re building a more resilient portfolio, one that’s better equipped to handle the ups and downs of the market.
What Should You Consider Before Investing in Silver ETFs?
Before diving in, there are a few key factors to weigh:
- Expense Ratio: This is the annual fee charged by the ETF. Lower expense ratios are generally better, as they eat into your returns less.
- Risk Appetite: Silver prices can be volatile. If you’re risk-averse, consider how comfortable you are with price swings.
- Tracking Error: This is the difference between the ETF's performance and that of the underlying silver index. The lower the tracking error, the more efficiently the fund is replicating silver’s price.
Also, check the liquidity of the fund—ETFs with higher trading volumes are easier to buy or sell without large price fluctuations. Take your time to compare options before investing, and match them to your goals.
Who Should Invest in Silver ETFs?
Silver ETFs aren’t just for seasoned investors—they can suit a wide range of profiles:
- First-time investors looking for exposure to commodities without the hassles of storing physical silver.
- Experienced investors who want to hedge against market volatility or inflation.
- Goal-based planners seeking short-term liquidity or long-term appreciation.
- Professionals building a diversified portfolio, including industrial commodities.
If you’re someone who believes in having a balanced approach to investing—and wants to tap into the growing industrial demand for silver—Silver ETFs could be a smart choice. Just make sure it aligns with your time horizon and risk appetite.
How to Invest in Silver ETFs in India
Getting started with Silver ETFs in India is easier than you might think. If you're already investing in stocks or mutual funds, you're halfway there. All you need is a Demat and trading account, which you can open online through platforms like Zerodha, Upstox, or other brokerage services.
Once you’re set up, follow these steps:
- Research available ETFs – Compare different silver ETFs on factors like expense ratio, liquidity, and tracking accuracy.
- Place your order – Just like buying a stock, search for the ETF’s symbol and make your purchase on the exchange.
- Monitor and manage – Silver ETF prices fluctuate with silver rates. Keep an eye on your investments and rebalance if needed.
Silver ETFs offer an accessible and cost-effective way to add precious metals to your portfolio—without worrying about physically storing silver.
Pros of Silver ETFs
Silver ETFs bring several practical advantages to the table:
- Cost-efficient: No need to pay for storage, security, or insurance like you would with physical silver. You just pay a small fund management fee.
- Highly liquid: Since they trade like stocks, you can easily buy or sell them during market hours at real-time prices.
- Flexible use: You can invest for short-term speculation, long-term portfolio diversification, or inflation protection.
- Transparency and purity: Fund managers invest in 99.99% pure silver, and the holdings are regularly disclosed.
- Dividend potential: Some ETFs linked to silver mining companies may even provide dividend payouts, giving you an extra stream of income.
If you want the benefits of silver investing without the hassle of safes, vaults, or purity checks, Silver ETFs are a smart alternative.
Cons of Silver ETFs
While Silver ETFs have their benefits, there are some drawbacks worth noting:
- Price volatility: Silver prices can fluctuate due to global demand, industrial usage, and economic uncertainties. This means your investment value can swing too.
- Tracking error: Operational costs and fees can cause ETFs to underperform their benchmark, even if silver prices go up.
- Counterparty risk: If the ETF uses silver derivatives, there's a risk that the financial partner (counterparty) might not fulfil the contract.
- Liquidity risks: Some silver ETFs may have lower trading volumes, making it harder to buy or sell without impacting the price.
- Tax implications: Gains from silver ETFs are taxed like debt instruments, and short-term profits are added to your income.
SEBI Guidelines for Investing in Silver ETFs
One of the reasons Silver ETFs are considered a reliable investment is the tight regulation by SEBI (Securities and Exchange Board of India). These guidelines help protect investors and ensure transparency in how these funds operate.
Here are the key rules:
- Purity matters: Fund houses must invest in silver that’s at least 99.99% pure, following international LBMA standards.
- Expense ratio capped: SEBI has set a maximum limit of 1% on the expense ratio, so investors don’t get overcharged on management fees.
- Minimum silver exposure: At least 95% of the fund must be invested in silver or silver-linked instruments.
- Tracking error: ETFs must keep the difference between their return and silver’s price movement (tracking error) under 2%. If it exceeds this, they have to disclose it publicly.
With these guardrails in place, investors can feel more confident about where and how their money is being deployed in the silver market.
Taxation of Silver ETFs
Just like other investments, your gains from Silver ETFs are subject to tax. But the rules differ depending on how long you stay invested.
- Short-term holding (< 36 months): If you sell within three years, any profit is added to your regular income and taxed based on your income tax slab
- Long-term holding (≥ 36 months): If you hold for more than three years, gains are taxed at 20% with the benefit of indexation (which adjusts your purchase cost for inflation, reducing your tax liability).
Also, if the ETF declares dividends, they’re added to your income and taxed as per your slab rate. Understanding this tax structure helps you plan better, especially if you're investing in silver for the long haul.
Risks of Investing in Silver ETFs
As with any investment, Silver ETFs aren’t risk-free. Here are the key risks to keep in mind:
- Price swings: Silver prices are volatile and can change based on industrial demand, market sentiment, or geopolitical events.
- Limited control: By investing through a fund, you rely on the fund manager’s strategy and do not have direct control over the silver assets.
- Tracking error: Sometimes the ETF doesn’t move in sync with silver prices due to costs and inefficiencies.
- Counterparty risks: If derivatives are used, there’s a risk that the counterparty might default on the contract.
- Tax burden: Unlike equity mutual funds, silver ETFs are taxed as debt instruments, which might lead to higher tax outgo for short-term investors.
Being aware of these risks will help you make a balanced decision and align this investment with your overall risk appetite and financial goals.
Examples of Silver ETFs
If you’re wondering where to begin your silver investment journey, there are several ETFs—both global and Indian—that give you exposure to silver in different ways.
- iShares MSCI Global Silver and Metals Miners ETF (SLVP): This one focuses on companies involved in silver mining and exploration. It’s ideal if you want to benefit from not just silver prices but also the performance of silver mining companies.
- iShares Silver Trust (SLV): A more direct play, this fund actually holds physical silver. So, when you buy SLV units, you’re essentially owning a piece of real silver—minus the hassle of storing it yourself.
- Global X Silver Miners ETF (SIL): This ETF targets global silver mining firms. While it gives you exposure to industry movements, it can be less liquid than others and may have higher trading costs.
Each of these ETFs offers different benefits and risk levels, so make sure you pick one that aligns with your goals and your comfort with market volatility.
Factors Affecting Silver ETF Share Price in India
Silver ETF prices don’t just move because silver prices move. Several factors influence them, and understanding these can help you make better buy or sell decisions.
- Silver Prices: This is the most direct influence. If global silver prices rise, ETF values generally go up.
- Supply and Demand: If industries ramp up silver usage—like in electronics or green energy—it can push prices higher.
- Currency Fluctuations: Since silver is traded globally, shifts in the rupee-dollar exchange rate can also impact returns.
- Economic Conditions: In times of economic uncertainty, investors often flock to safe-haven assets like silver, boosting demand.
- Fund-specific Factors: Things like management fees, taxes, and operational expenses can slightly skew returns compared to silver’s actual price performance.
Being aware of these drivers helps you anticipate how your investment might behave over time.
Silver ETF List Based on Expense Ratio
While returns are key, costs matter too. Expense ratios are the annual fees you pay for investing in an ETF and they eat into your profits. Here’s a quick snapshot of some popular Silver ETFs and how they compare on costs:
Silver ETF |
Expense Ratio |
ICICI Prudential Silver ETF |
0.30% |
Nippon India Silver ETF |
0.32% |
HDFC Silver ETF |
0.33% |
Aditya Birla Sun Life Silver ETF |
0.35% |
Axis Silver ETF |
0.36% |
Top Silver ETF Performance and Returns
If you are looking at past numbers to guide your decision, Silver ETFs in India have delivered strong returns recently. Here's a snapshot of how some schemes have performed:
Scheme |
1-Year Return |
3-Year Return |
5-Year Return |
HDFC Silver ETF |
34.49% |
- |
- |
Nippon India Silver ETF |
33.31% |
13.60% |
- |
UTI Silver ETF |
33.86% |
- |
- |
ICICI Prudential Silver ETF |
33.63% |
13.49% |
- |
Axis Silver ETF |
33.02% |
- |
- |
These figures highlight how silver ETFs have capitalised on global price trends, especially in recent years. However, always remember that past performance doesn’t guarantee future results. It's just one piece of the puzzle.
Impact of Government Policies on Silver ETFs in India
Government regulations and policy changes play a huge role in how Silver ETFs behave. For instance, changes in import duties on silver can directly impact prices and, in turn, your ETF’s performance.
At the same time, SEBI regulations ensure transparency, risk control, and investor protection—making silver ETFs a more trustworthy option than informal or unregulated silver investments. Policies promoting manufacturing, solar energy, and infrastructure development also indirectly boost industrial demand for silver, helping prices remain buoyant.
Even tax reforms or GST tweaks can influence the after-tax returns from your investments. So, keeping an eye on budget announcements and SEBI updates is a smart move for any silver ETF investor.
Silver ETF GDP Contribution
You might wonder—how does investing in silver affect the broader economy?
Silver ETFs may seem niche, but they support various high-impact industries. As silver is a critical component in sectors like electronics, solar energy, electric vehicles, and healthcare, investing through ETFs indirectly channels funds into these growth areas.
They also boost participation in capital markets, mobilising household savings and strengthening financial infrastructure. Increased trading volumes and investor participation in such ETFs add liquidity to the market, promoting India’s economic development from the ground up.
Silver ETFs vs Gold ETFs
When it comes to precious metals, gold and silver are often compared—but they play very different roles in your portfolio.
Gold ETFs are typically seen as a safe haven during economic downturns. They’re less volatile and more focused on wealth preservation. Silver ETFs, on the other hand, act both as a precious metal and an industrial commodity, which means they tend to be more sensitive to economic cycles and industrial demand.
Here is a simplified comparison:
Aspect of Comparison |
Gold ETFs |
Silver ETFs |
Demand Drivers |
Portfolio hedge, inflation protection |
Industrial use + precious metal |
Price Sensitivity |
Less sensitive to economic changes |
More correlated with market volatility |
Storage Costs |
Lower |
Slightly higher due to bulkiness |
Trading Volume |
Higher liquidity, widely traded |
Can be less liquid depending on the fund |
Stability vs Growth |
More stable |
Potential for higher growth (but higher risk) |
Silver ETFs vs Gold ETFs
When it comes to precious metals, gold and silver are often compared—but they play very different roles in your portfolio.
Gold ETFs are typically seen as a safe haven during economic downturns. They’re less volatile and more focused on wealth preservation. Silver ETFs, on the other hand, act both as a precious metal and an industrial commodity, which means they tend to be more sensitive to economic cycles and industrial demand.
Here is a simplified comparison:
Aspect of Comparison |
Gold ETFs |
Silver ETFs |
Demand Drivers |
Portfolio hedge, inflation protection |
Industrial use + precious metal |
Price Sensitivity |
Less sensitive to economic changes |
More correlated with market volatility |
Storage Costs |
Lower |
Slightly higher due to bulkiness |
Trading Volume |
Higher liquidity, widely traded |
Can be less liquid depending on the fund |
Stability vs Growth |
More stable |
Potential for higher growth (but higher risk) |
Key takeaways
If you’re considering silver as part of your investment portfolio, Silver ETFs offer one of the simplest and most effective ways to do it. You don’t need to worry about storage, purity, or security—everything is taken care of by the fund. And because they’re traded on stock exchanges, you get the benefit of flexibility and liquidity too.
Silver ETFs can:
- Track the market price of silver without owning it physically
- Offer a hedge against inflation and currency devaluation
- Provide portfolio diversification, especially during market instability
- Help retail investors participate in commodities without high entry barriers
Conclusion
Silver ETFs give you a powerful way to invest in precious metals without the hassle of physical ownership. You gain access to professionally managed silver exposure that aligns with international purity standards and SEBI regulations. These funds can play a vital role in diversifying your portfolio and protecting your wealth in volatile times.
And because they’re traded just like any other stock, Silver ETFs offer unmatched convenience for investors of all levels. If you’re aiming for long-term wealth creation and want to add a smart, inflation-resistant layer to your investments—Silver ETFs could be the strategic move you’ve been waiting for.
You can also choose to invest in mutual funds to diversify your investment portfolio. With over 1000+ listed mutual funds on the Bajaj Finserv platform, you can surely find some options which meets your investment needs. You can easily compare various mutual fund schemes and use our SIP calculator to decide your monthly investment amount.
