How to Invest In Silver: Top Ways of Buying and Selling It

Gold and Silver are two of India’s most household precious metals. While purchasing gold is much more overwhelming and expensive, silver is much less precious. Yet, it is a highly sought-after investment instrument.

Whether you want to own it in a physical form or in the various other forms available on the market, this blog will guide you through the process of investing in it through the right venues and the tips to remember while purchasing it.

That being said, without any further ado, let’s get into it!

Overview of Investing in Silver

Silver is a precious metal which serves several purposes other than being an important member of Indian households.

As a good conductor of electricity, silver is used in batteries and electric contacts. Silver paint is also essential for printed circuits, dental alloys and medical equipment. It is also a crucial industrial commodity. 

Due to these industrial and medical purposes and its rarity, silver is a valuable asset. People tend to invest aggressively in silver during economic fluctuations and inflation pressures. Historically, silver has always been in demand and, thus, a relatively safe investment. 

Like gold, silver is a necessary asset in an Indian household. One can easily find this metal as ornaments, bars, coins or utensils. They can help household stay afloat during economic crises.

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What Are the Different Ways of Investing in Silver?

Silver can bring you wholesome returns if you invest it correctly. However, investors must consider all pros and cons before investing.

Exchange Traded Funds (ETFs)

One popular way to invest in silver is with Exchange Traded Funds (ETFs). This is an excellent investment option for those who prefer investing in silver without physically possessing silver coins or jewellery.

Silver ETFs invest 95% of their assets in physical silver and silver-related instruments. With these ETFs, you can earn returns from appreciation in the price of silver without worrying about theft. 

Also, you can sell Silver ETFs at market price as they are highly liquid. Silver is volatile, unlike gold, whose value depends on prevailing market conditions. By investing in silver ETFs, you can avoid certain risks involved in the physical trade of silver. Also, you can sell Silver ETFs at market price as they are highly liquid. 

Bullions or Coins

In India, many people prefer to invest in silver in the form of ingots, bars, and coins. It is easy to purchase these bullions or coins online and offline from government-approved dealers and jewellers.

You can get decent profits from selling silver bullion and coins when this commodity’s price rises in the market. However, if you urgently need cash, you may not be able to sell silver at a fair price.

Silver Futures

A futures contract is an agreement between two parties to buy or sell an underlying asset at a given date. Silver futures or Silver futures contracts are another efficient investment method. 

However, given the unpredictable nature of the silver market, this is quite a risky investment. There are high chances of investors facing losses as prices can rise or fall suddenly. So, buying or selling in such unfavourable markets may not bring desirable profits.

Mining Stocks

You can also purchase stocks of silver mining companies as a way to invest in silver. This can bring in distinctive benefits in two possible ways. 

First, such a company’s earnings will rise as the market price of silver increases. Their profits may increase faster than silver’s price in favourable market conditions. Second, miners can increase this metal’s production with time and simultaneously increase their profits. That is why silver mining stocks bring fruitful results for their investors.

Investors must deeply analyse a silver mining company before investing in securities. It is also important to know that investing in this sector has  some disadvantages. Due to their speculative nature, silver mining stock prices can be volatile and thus, returns can be unpredictable.

E-Silver

Apart from these prominent ways to buy silver, you can also opt for investments via E-Silver. It is innovated by National Spot Exchange (NSEL) to enable investors to invest in silver in smaller denomination and hold it in Demat form. It is available on the pan India electronic trading platform set up by National Spot Exchange.

These are great options to diversify one’s portfolio as they offer exposure to several mining companies and are low-risk investments.

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Is Silver a Good Investment?

As a precious metal, silver behaves quite differently from gold in terms of market fluctuations. However, it can still be a suitable investment choice for the right investor. 

Here are some points that support silver as a good investment option:

• Safe haven when the stock market is down

When investing in the stock market, it is important to include some safe-haven assets in your portfolio. Silver is one such essential commodity for investors.

Silver tends to be negatively proportional to market upsides and downsides. This implies that the price of silver rises when the stock market tends to go down. That is why the demand for silver also increases during adverse movements in the market.

• Storehouse of value

Silver earns profits over time and increases the value of your portfolio. Therefore, it is a good source for investors to make returns.

• Important industrial metal

Silver is more than just a precious metal for investors to earn returns in the long run. It has many industrial applications, including use in dental alloys, paints, mirrors, and many other purposes. Silver can increase in price as a significant element in the industrial and domestic world. 

• A tangible asset

Silver is a tangible asset you can possess and hold, unlike some investment options.  This acts as long-term security for investors, as this metal is always in demand. That is why silver is one of the best options for personal investment to earn long-term returns. 

What are the Cons of Investing in Physical Silver?

Many consider owning physical silver a wise investment in the long run. However, here are a few drawbacks of investing in silver.

• Risk of theft

For high returns with physical silver, investors must possess them in large quantities. However, keeping excessive of these precious metals might increase the risks of robbery. 

• Inconvenience to exchange

Although silver brings in liquidity, it takes too much time to exchange silver for cash. Not all investors have ample time to spare to complete this exchange process.

• Bullions offer a poor return on investment

Although silver is an excellent safe haven, possessing silver bullion may bring low returns on investment. Bullions do not provide dividend pay-out or organic growth like other investments.

• Downsides of an industrial metal

The case for holding silver as a hedge against economic downturns is undermined by the fact that, as an industrial metal, demand for silver can drop significantly during times of economic weakness. 

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Things to Consider When Buying and Selling Silver

Here are some points one must remember before you buy and sell silver: 

• Making charges

To invest in silver, you must avoid blindly referring to its marked price for purchases. Instead, making an informed decision about the ornament or coin’s associated prices is necessary.  

When buying silver jewellery or coin, experts suggest knowing its making charges before purchasing. It would be best if you also asked  for the prevailing market price of silver.

• Gemstones on silver jewellery

Very often, silver jewellery has embedded gemstones. Ensure that the jeweller does not add these gemstones’ weight to the silver’s price before purchasing. 

• Purity of silver

Always opt for hallmarked silver objects, as they are one of many proofs of the metal’s purity. However, hallmarking is voluntary and depends on the jeweller. If any jeweller displays your articles without this hallmarking, you may request one. 

When talking about pure silver jewellery, we must remember that all silver objects contain a mixture of other metals. These metals, like zinc or copper, add durability and strength to the final product. Therefore, one must always enquire about what other metal is used while buying silver objects.

• Decide on investment type

Before investing in silver, an investor should decide if the investment type is favourable to their financial needs. This will help you plan an investment strategy and act wisely. 

To choose a suitable investment type, one must be well aware of their current finances, and risk appetite and plan for the long run. Then, they can choose from options like future contracts, silver coins and bullions, jewellery, mining stock and Silver ETFs.

• Have a locker

To earn high returns, you must purchase silver in large amounts. However, storing a large quantity of this precious metal in your home may attract unwanted attention. Therefore, you may opt for a locker to keep your silver safe. 

You can use bank lockers or keep a safe in your house if you wish to own physical silver.

• Enquire about the buyback policy

Many people who sell their old silver articles for new ones often check for a buyback policy. This is because they wish to know its price if they purchase it back from the same jeweller at a future date. In addition, this provides knowledge about various charges that go into calculating the price of silver. 

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10 Key Rules for Silver Investment 

Investing in silver in India, given its growing role in the global market, requires a strategic approach. Let’s take a look at the ten key rules to guide your investment:

• Start Small with Silver Coins: Ideal for modest investments, silver coins are accessible and easy to store, offering a practical entry point for regular savers.

• Opt for Silver Bars for Larger Investments: Silver bars represent an attractive choice for significant sums, being in high demand and easy to liquidate.

• Leverage the Online Commodity Market: Digital platforms offer a different way to invest in silver, allowing market leverage but requiring careful monitoring due to price volatility.

• Purchase from Reliable Suppliers: Always buy silver from trusted vendors to ensure purity and value, which is particularly important for bars that need verification for authenticity.

• Store Silver Safely: Utilize bank lockers for secure storage, especially for large quantities, to mitigate risks like theft.

• Monitor Silver Rates Regularly: Stay updated with the latest market prices to make informed buying or selling decisions.

• Diversify Your Buying Strategy: Spread your purchases to average price changes over time.

• Sell When the Market Peaks: Be ready to liquidate your holdings when prices are high, with the option to repurchase if prices drop.

• Maintain Cash Reserves: Keep a portion of your investment budget in cash for opportunistic purchases when the market conditions are favourable.

Stay Informed on Global Market Trends: Global financial trends significantly impact silver prices in India, so staying on top of these changes is crucial for strategic investment.

Taxation on Silver Investment in India

Silver is a capital asset. Therefore, profits from selling the physical metal are taxed like debt securities. The same taxation rule applies to silver ETFs.

Therefore, selling your silver investments within three years of purchase will be a short-term capital gain. These gains will be added to your income and taxed according to your income tax slab rate.

On the other hand, selling silver after 3 years will earn long-term capital gains. However, this comes with a taxation of 20% and indexation.

With recent change in budget 2023, all the gains on Sliver ETF will be classified as STCG and normal tax slab rare will be applicable.

Final Words

Silver is a much more volatile metal than gold regarding market fluctuations. Therefore, investors must conduct well-informed research to invest in silver. If an investor handles it well, silver can earn them profitable returns. However, they must always be aware of impending risks that come along.  

Frequently Asked Questions