Does Your Portfolio Have a Silver Lining?

By | August 11, 2015



All that glitters is not gold. Or silver.

Whether considered auspicious or valuable, silver tends to form a part of many an investment portfolio across India. After USA, China and Japan, India is the largest consumer of silver in the world. Consumption in India occurs for industrial and investment purposes. It is considered the second most popular precious metal in India, after gold. Purchasing of silver in India is dual in nature. It is considered a useful metal that also works as an investment. Throw in words like ‘auspicious’ and ‘prosperity’ and silver purchases are especially high during weddings and festivals. Besides buying physical silver, people have also taken to buying silver online.

Some popular ways – how to invest in silver in India

  • Buying silver jewellery
    This is the traditional method of investing in silver. Jewellery, puja articles and dining sets are very popular silver items. Reputed jewellers can be trusted when it comes to purity. Good jewellery and other silver items are marked ‘925’ which represents sterling silver. Sterling Silver, which is 92.5% pure silver, is an alloy of silver and copper.
  • Silver bullion, bars or coins
    Just like gold, you can approach banks to buy silver coins or bars. This method offers the advantage of getting up to 24 carat pure silver. When you approach a bank, you get the chance to buy silver in multiples of 50 grams. It also comes with the surety that the silver you purchase is 99.99% pure.
  • Silver futures
    Another way you could invest in silver is through futures trading. Commodity exchanges like MCX India which allows investors to invest in metals like gold, silver, nickel etc. Through the exchange you can invest in Silver, Silver HNI, Silver M and Silver Micro. The amount that is bought or sold  and the quality of silver is fixed when entering into a contract. The price payable is as per silver rates on the date of delivery, which is at a later date from when the contract was entered into.

Should you or should you not invest in silver?

Cross my palm with silver and I’ll tell you how I lost my gold.

  • Jewellery and other silver items may not make for the best form of investment. Returns are compromised when one deducts making charges and melting charges. This means you get much less than the prevalent silver rate on the day you choose to resell; as much as 10% – 15% lower.
  • Buying coins from a bank are more expensive than your friendly neighbourhood jeweller because purchases come with an Assay Certification and tamper-proof packaging. Aesthetically speaking, you can’t adorn yourself with silver coins, making it less attractive or useful. However, when considering returns, coins fare better than jewellery because there are no making charges or service taxes involved when buying silver coins from a bank.
  • Commodity futures are a good investment for profit through speculation. However, trading in Silver futures requires sizeable investments and the ability to bear trading costs viz. taxes, duties, brokerage and exchange rate losses can dampen profits.

Temporary dips in prices tend to send Indians on a buying frenzy. However, investing in silver should be approached with a long-term perspective. Returns in the short-medium term are not usually attractive, unless you actively monitor price movements.

While investing in silver may not be quite as straightforward as gold, studying silver rates in India and the factors that affect silver prices in India will help you identify when silver prices are at considerable lows for possible long-term gains, sufficient to offset above mentioned loss in value.

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