How can investors benefit from putting their money in silver?

ICICI Prudential Mutual Fund and Nippon India Mutual Fund are tapping into the latent demand for silver investments, with the recent launch of their silver exchange-traded funds (ETFs) and fund of fund (FoF). Other fund houses like DSP, HDFC and Mirae Asset will soon come out with their offerings too. So, does an investment in silver bode well for the retail investor in current times? Analysts say yes, pointing to the metal’s low but positive correlation with equities. Chirag Mehta, senior fund manager-alternative at Quantum Mutual Fund, told Business Standard that around 70 per cent of silver’s usage comes from industrial applications. When economic growth is high, rising demand pushes its price up. So, while gold has a negative correlation with stocks, silver is more likely to work the other way around. While silver has declined 12.5% over the past year, experts expect it to begin performing again in the coming few months. The metal is trading at around Rs 60,000 per kg in key metro cities, but Naveen Mathur, director-commodities and currencies, Anand Rathi Shares and Stock Brokers told Business Standard that the metal could reach a price of around Rs 67,000 in the coming few months.

In the last decade, gold has definitely outperformed silver in terms of returns. So, experts suggest only considering silver as one option in a basket of commodities. For those considering investing only in silver, experts suggest having a 10-year plus horizon. Business Standard’s Sanjay Kumar Singh explains more. For those planning to invest in silver, you could benefit from an industrial upturn. One could allocate 5-10 per cent of the pro-cyclical component of their portfolio to it. Long-term investors should take the systematic investment plan (SIP) route to benefit from silver’s volatility.

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