Silver ETF’s start faded: Investors have suffered losses from all 6 silver ETFs in the country so far, the first five months were in losses

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Silver ETFs, which started on a high this year, have disappointed investors. All the 6 silver ETFs currently available in the country were launched in January and February. Investors have suffered losses from all of them so far. The biggest reason for this is that silver has been the weakest performing metal for the past one year.

At the beginning of the year, the average price per unit of Silver ETF was Rs 61.50, which came down from Rs 60.30 on June 22. Accordingly, till 2022 the investors of Silver ETF are in loss of about 2%. On the other hand, investors of Gold ETF are in profit of more than 5% during this period. However, in the initial three months, silver ETF investors were losing 4.56% on an average. This means that the performance has improved in the last two months. Presently, the total AUM of Silver ETF is above Rs 850 crore.

Of all the silver ETFs available in the country, none gave positive returns in the first three months.

Investors can come in profits after a few months
65-70% of silver is used for industrial purposes. This is the reason that whenever industries get affected, its prices start falling. Ajay Kedia, MD, Kedia Advisory, said silver gave 58% return in three years as against gold’s 48%. But, in the last one year, where the return of gold was 8%, the price of silver has declined by 11%. This had a direct impact on ETFs, but after a few months there may be a boom.

What is ETF?ETFs are a type of investment that are bought and sold on stock exchanges. Trading ETFs is similar to trading in stocks. Bonds, or stocks, are bought and sold in ETFs. An exchange-traded fund is like a mutual fund, but unlike a mutual fund, an ETF can be sold at any time during the trading period.

Types of ETFs

Gold ETF
Through Gold Exchange Traded Funds (ETFs), investors can buy/sell gold electronically and take arbitrage gains (gains from buying in one market and selling in another). Gold ETFs have been operating in India since 2007 and are regulated instruments on NSE and BSE. Gold ETFs are traded on the stock exchange in the unit size of one gram. The change in its price is linked to the fluctuations in the price of physical gold in the market.

Index ETFs
Index ETFs consist of indexes like Nifty or Sensex and their price movement is similar to the movement in its underlying index. For example, a banking ETF works on a banking index and its price will increase or decrease according to the movement in that banking index.

Bond ETFs
The money in a bond ETF is invested in bonds that are linked to the components of its underlying index. This can be a bond ETF that is based on a particular maturity horizon like short term, long term etc. Bharat Bond ETF comes under this category with a stipulated maturity period.

Currency ETFs
Currency ETFs Currency exchange-traded funds allow the investor to participate in the currency markets without having to purchase a specific currency. It is invested in a single currency or in a pool of currencies. The idea behind this investment is to track the price movements of a single currency or a basket of currencies.

Sector ETFs
Sector ETFs invest only in stocks and securities of a specific sector or industry. There are some sector-specific ETFs like pharma funds, technology funds, which fall into these specific sectors.

Highlights of ETFs
The portfolio of ETFs consists of several types of securities. Their return is similar to the index. These shares are listed on the market. There they can be bought and sold. That is, the returns and risk of ETFs depend on the volatility in an index like BSE Sensex or an asset like gold. ETF prices are known in real time. That is, their prices are also known at the time of transaction itself. Whereas this does not happen with the NAV of mutual funds. NV is calculated at the end of the day. ETFs are an economical and efficient way to diversify your portfolio. This is because they cover all the indices, sectors, countries and asset classes.

ETF the biggest feature of
Its being liquid. Trading in the stock market makes it relatively easy to buy and sell. You do not need to go to the distributor of mutual funds to invest in this. You also have to approach the mutual fund company to sell your units in common schemes of mutual funds. Due to buying and selling in the stock market, its price is real time. To buy ETFs, you need to open a demat account through your broker. Through this you can buy and sell. This does not apply in mutual fund schemes.

Benefits of Investing in ETFs

  • Like stocks, ETFs can be traded and prices can be tracked.
  • ETFs provide investment information on a daily basis, which makes investing in them more transparent.
  • ETFs can be sold easily.
  • One can invest in different sectors by investing in ETFs.
  • ETF dividends are not subject to income tax.
  • There are fund managers for every ETF, so that the investor does not have to buy or sell shares.
  • ETFs make for an affordable investment with a lower expense ratio than mutual funds.
  • The expense ratio in ETFs is also lower than in mutual fund schemes. In this the expense ratio is between 0.5 to 1%.
  • In this, you do not even have to pay exit load like mutual fund schemes.

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