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What are Silver ETFs? Are they more profitable than Gold ETFs?

10 Mins 11 Mar 2022 0 COMMENT

Gold and silver have reserved their emotional and financial significance in the minds of Indian investors for decades. Besides their ornamental purpose, they are used widely as a tool to hedge the risks of inflation and volatility in equity markets. You must have purchased them in their physical form of jewellery, coins, bars, etc. too. But now, you can invest in them digitally as well. Out of these two, gold already has many digital avatars such as Gold Bonds, Gold ETFs, etc. Now, Mutual Fund companies have introduced Silver ETFs too.

Besides being an investment tool, silver is also in demand for its industrial usage. It is used in the manufacturing of electronics, electric vehicles, etc. Silver ETFs are poised to make their mark as a lucrative investment option slowly but surely. Hence, the launch of Silver ETFs in the stocks markets has created excitement in the investor fraternity. If you are peaking with curiosity about Silver ETFs, this article will give you a primer on all that you need to know!

What are Silver ETFs?

A Silver ETF is an ETF (Exchange Traded Fund) scheme that invests its fund in silver and silver-related instruments. To understand the concept of a Silver ETF better, you must first know what an ETF means.

An ETF is a low-cost investment tool that invests its accumulated funds in a group of asset classes like commodities, equities, bonds, etc. Its asset allocation strategy is to replicate the structure of a market benchmark index. It could be an equity index such as Sensex, Nifty, or a commodity index, and so on. It offers you the diversified benefits of investment similar to a Mutual Fund. Its trading mechanism is like a stock. You can buy and sell an ETF share on stock markets as you trade a share. Its price fluctuates throughout the trading hours of the day.

Additional Read: ETFs Vs Stocks - Difference

The funds collected by a Silver ETF scheme are used to buy physical silver that is stored in vaults. This ETF tracks the price of physical silver. It does not hold stocks of any silver mining company or other such related business.

Silver ETF is a relatively better and more advanced form of investing in silver as it conveniently filters out the problems that arise from investing in physical silver. With this ETF investment, you do not have to be worried about purity or storage, or insurance concerns. A Silver ETF is more liquid than physical silver, as you can easily trade it on stock markets. Thus, if you invest in Silver ETF shares of a particular value, you essentially own a quantity of silver that corresponds to that exact value.

Up until now, you could add silver to your portfolio by investing in Silver Futures. However, futures are short-lived as they have a defined expiry date. Silver ETFs can serve the purpose of a short-term and a long-term investment.

How to invest in Silver ETFs?

Investing in Silver ETFs is as easy as investing in stocks. You only need to have a Demat and Trading account to start your investment here. A registered broker can open these accounts for you if you do not have them.

Are Silver ETFs more profitable than Gold ETFs?

Historically, gold has been a primary tool to hedge equity and inflation risk by investors globally. But now, with the introduction of silver in ETFs, there have been discussions as to which one will be more profitable. Can a Silver ETF outpace a Gold ETF?

Both gold and silver bring a varied set of diversification benefits to your portfolio. The reason is, both of these precious metals have different sets of underlying factors that drive their demand and prices. Silver, for instance, draws high demand from the automobile sector and industries manufacturing electronic goods and devices. Thus, when the economy grows, the demand for silver also increases. This gives silver a reputation as an effective investment to hedge inflation and it has a higher correlation with equity market. Gold, on the other hand, has greater demand as a tool to beat equity market volatility. This is due to its low correlation with equity. It is also extensively used in the jewellery-making industry. All these factors independently drive the prices of gold and silver in the market.

From a cost point of view, silver as a metal is much cheaper than gold. Hence, it comes with more storage costs as compared to gold. It translates into higher expense ratios for Silver ETFs. But from a trading point of view, silver is not traded in volumes as much as gold. Hence, it may attract more price volatility. Therefore, it is hard to pitch gold ETFs against silver ETFs, as it is not an apple-to-apple comparison. You must treat them both as distinct investments. It is hard to say which will be a more profitable avenue as the answer will change depending on the varying market and economic conditions.

Additional Read: What is Gold ETF?


Even though Gold and Silver belong to the commodity asset class, there is no single answer for which is the more superior investment in ETFs. But, one thing is certain - every additional investment tool will help in diversifying your portfolio and making it more wholesome from the perspective of exposure. You should, however, be careful not to overinvest in any single commodity and cap your asset allocation according to the level of risk you are willing to take and your investment objective.

Disclaimer: ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100.  AMFI Regn. No.: ARN-0845. We are distributors for Mutual funds. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Please note, Mutual Fund related services are not Exchange traded products and I-Sec is just acting as distributor to solicit these products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein mentioned are solely for informational and educational purpose.