Mutual fund houses have been rushing to apply for silver exchange-traded funds (ETFs) ever since SEBI released the final rules for introduction of the new fund category. In fact, many AMCs including Nippon India, Mirae Asset, ABSL, HDFC and ICICI Prudential have already filed papers with SEBI seeking approval to launch silver ETFs.
This reflects the optimism of AMCs with regards to the product. But do MFDs and RIAs also share a similar enthusiasm?
Not likely. MFDs and RIAs do not seem very eager to recommend the product to their clients anytime soon. They say it's always better to wait for some time before investing in a newly launched investment instrument.
"I would wait for some time before looking into it as silver is volatile and we are not used to tracking its price movement," said Lovaii Navlakhi of International Money Matters.
Harshavardhan Bhusari, founder of Fin Pals, said that the metal’s poor past record makes it an unattractive option. "10-12 years back there was a hype around silver bullions. Many investors who invested back then are still holding it in their lockers due to poor or negative returns," Bhusari said.
"I will see how the trend shapes up before recommending to clients," he added.
Data from silverprice.org shows that silver prices haven’t really gone up for the last ten years. The price, after reaching close to Rs. 70,000 a kg during 2011-2012, remained subdued for almost 10 years. The metal regained the 2011-2012 level only this year.
Ranjit Dani, co-founder of Think Consultants believes that silver ETFs can catch up as a regular investment option only if prices jump. “Most of my clients aren’t keen to invest in silver but they might get interested if prices run up,” he said, while adding that even gold ETF took several years to find acceptance among investors.
However, Azeem Jagani of Composite Investment Services said that he is open to recommending the product to his clients. He said that silver ETFs can be a good option to diversify commodity holdings. "Silver is a good addition to the MF basket. It can be used for diversification purpose," he said.
'Start small'
Lovaii Navlakhi and Harshavardhan Bhusari say if an investor is keen on buying silver ETF, MFDs can recommend a small investment.
"If someone really wants to invest, they should start with a small amount. This will help them gain experience without exposing their portfolio to high risks,” he said.
“If clients want, I would ask them to put a portion of commodity allocation, which is generally 5-10%, in silver ETFs,” Bhusari said.
