Invest in Silver: Nippon India Silver ETF and FOF

Nippon India Mutual Fund has launched Nippon India Silver ETF and Nippon India Silver ETF FOF. The fund of funds (FOF) will invest in units of Nippon India Silver ETF. While gold Exchange Traded Funds (ETFs) have been around in India for some, silver ETFs are very new. Nippon India Silver ETF is one of only 3 silver ETFs announced so far. In this article, we will review silver as an asset class and investment option. We will also review the NFO.

The NFO opens on January 13th and closes on January 27th, 2022

Nippon India Silver ETF

The ETF would invest in physical silver and silver-related instruments. The performance of the scheme shall be benchmarked against the domestic price of silver (based on LBMA Silver daily spot-fixing price). Physical silver will be of 99.9% purity conforming to London Bullion Market Association (LBMA) Good Delivery Standards.

Why invest in silver?

Though many families in India buy physical silver often, it is mainly for auspicious and / or decorative purposes. However, silver is an important asset class in the developed markets. Below are the reasons why one should look at silver as an investment option:-

• Silver, as an asset class, can be used in your asset allocation to diversify portfolio risks because silver has low correlation with equities (see the chart below).
  
  

  Source: National Stock Exchange, goldprice.org, silverprice.org, Advisorkhoj Research, as on 31^st December 2021. Disclaimer: Past performance may or may not be sustained in the future.



• You can see in the chart above that silver is usually counter-cyclical to equities i.e. silver outperforms when equities underperform and vice versa.


• Silver will provide more stability to your portfolio especially when equity valuations seem over-stretched.


• Industrial demand for silver is likely rise in the future e.g. advanced electronics, solar energy etc with potential of superior long term ROI.

Why invest in Nifty Silver ETF?

• Purity is a very important consideration in purchasing physical silver. Nippon India Silver ETF would invest in physical silver of high purity (999 parts per thousandpurity) conforming to the standards of London Bullion Market Association (LBMA).


• Silver is a much bulkier commodity compared gold, requiring much more storage space and costs. Nifty Silver ETF is a financial asset (no storage costs) and is more cost efficient investment option.


• Liquidity is a very important consideration in any physical asset, especially silver. ETFs are highly liquid investments. You can sell units of silver ETFs on any trading day in the stock market.


• You can invest in Nippon India Silver ETF with a minimum investment amount of just Rs 1,000.

How to invest in Nippon India Silver ETF?

• You need to have Demat and trading account to invest in Nippon India Silver ETF.


• During the NFO period, you can invest in the units of the ETF directly with the AMC at par value by subscribing for the ETF.


• After the NFO subscription period, you can buy or sell units of silver ETF at any time during trading sessions on stock exchanges.


• You can also invest or redeem units of Nippon India Silver ETF directly with Nippon India Mutual Fund, if you are transacting in lot sizes (creation units). Please refer to the Scheme Information Document for more details.

Nippon India Silver ETF FOF

• Nippon India Silver ETF FOFwill invest in units of Nippon India Silver ETF.


• You can invest in Nippon India Silver ETF FOF even if you do not have a demat account.


• An FOF is like any other open ended mutual fund scheme. You can invest in or redeem units of FOF scheme directly with the asset management company (AMC), through registrar and transfer agent (RTA) or through your mutual fund distributor (financial advisor).


• You can invest in the FOF through Systematic Investment Plan (SIP).


• The expense ratio (TER) of the FOF is likely to be higher than the ETF, but you will enjoy the mutual fund facilities.

Who should invest in Nippon India Silver ETF and FOF?

• Investors who want to diversify portfolio risks through asset allocation by investing in a new asset class


• Investors who are looking for capital appreciation over long investment horizons


• Investors should have minimum 3 to 5 years investment tenures


• Investors with moderately high to high risk appetites


• Investors should consult with their financial advisors if Nippon India Silver ETF and FOF are suitable for their investment needs