Silver – A Shining Investment?

By | February 16, 2016

Investing In Silver

Raman works in an MNC at a mid-management position and earns well. He is a smart investor and maintains a good investment portfolio. He follows a balanced approach and maintains a healthy mix of investments which give fixed and fluctuating returns.

Like most Indians, he has a soft corner for precious metals such as gold and silver and has invested a tidy sum in gold. Raman is now thinking about investing in gold’s close cousin, silver. He’s looking at it as an investment for the long term.

Before Raman makes his investment, there are a few things he should think about.

Points to ponder

High Liquidity:  Gold and silver are two commodities which always have ready demand. These two commodities can be converted into cash in a hassle-free manner, anytime and anywhere. Both gold and silver are globally accepted commodities, so it’s unlikely that their demand will fade any time soon.

Acts as collateral: Silver bars can act as a security against loans. Accepted worldwide, silver bars can help you get a loan easily.

Buying options: If the Silver you’re buying is for investment purposes, it should ideally be held in the form of bars and coins. Other alternatives include buying silver jewellery or silverware, but these are not pure forms of silver and tend to be more expensive because of the ‘making charges’ involved.

There are no silver exchange traded fund (ETFs) in India, so you cannot buy or trade in silver stocks. The only option you have is either to buy silver bars or coins, or silver jewellery and silverware.

Be aware of the risk factors: Investment in commodities might not always be safe as the price of this shiny investment depends on the share market. So, keep an eye on what’s happening across the globe as well as on how the share market is performing when deciding to invest in silver.

No income other than value appreciation: Silver is not going to earn interest like a bank account does. The only way to make a profit out of investing in silver is through an appreciation in its value. But again, as we just pointed out, the price of silver fluctuates depending on the performance of the share market.

Storage – a matter of concern: When it comes to storage, it’s not always feasible to store a huge silver bar in your house as it might not be very secure and keeping it in a bank locker will incur charges. So keep this in mind before you buy a silver bar.

Long term view along with a correct exit: An investment, whether it is in equities or in gold/silver is always considered to be a risk venture. You should ideally look at it as a long-term investment as it will help in mitigating the risk on the investment. But you need not keep it till the end of the estimated investment tenure; a correct exit will instead yield better profits.

A tiny tip before investing in silver: Instead of making a lump sum investment in silver, it is advisable instead to invest in the shiny metal at regular periodic intervals so that the risk factors (such as a sudden rise or dip in silver prices and market volatility) are offset.

How to invest in silver?

India is one of the largest consumers of silver and buying silver is considered to be auspicious. Listed below are some of the most popular forms of buying silver:

  • Buying silver bars or coins: You can buy up to 24 carat pure silver in the form of bars and coins. When you approach a bank, you even have the option of buying silver in multiples of 50 grams.
  • Buying silver jewellery: This is one of the most popular methods of buying silver. Good silver jewellery comes with a ‘925’ hallmark which represents sterling silver and is 92.5% pure.
  • Silver futures: You can also invest in silver stocks through commodity exchanges like MCX India which allows investors to invest in silver, gold, copper and other metals. The price payable is as per silver rates on the date of delivery. The amount of silver that is bought or sold and the quality, is fixed through a prior contract.

Investing in silver should be approached with a long-term prospective ideally, since short-term returns are not usually fruitful. So, keep an eye on the silver prices in India and you should be able to judge the right time to invest in silver.

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