DSP MF launches silver ETFs amid volatile markets

  • DSP Investment Managers launches silver exchange ETFswho will invest in physical silver and silver-related instruments.
  • Investing in silver can provide a hedge against traditional equity and debt products.
  • Silver ETF is more suitable for experienced investors who understand commodity cycles.

DSP Investment Managers on Monday launched DSP Silver ETF (exchange traded fund), which will invest in physical silver and silver-related instruments. This investment vehicle will give investors the opportunity to invest in this precious metal without physically owning it. The ETF price will be in line with the silver price movement.

Silver prices are determined by its industrial consumption and supply dynamics. The precious metal is a hedge against the traditional equity and debt portfolio, as silver has a low correlation to both asset classes. However, silver is a high risk asset class and therefore best suited for investors who understand precious metals and commodity cycles.

A silver ETF can be used to hedge against equity and debt market products in times of volatility. “This new ETF offers investors an easier way to buy or sell silver compared to the physical version with the freedom to trade easily,” DSP Investment Managers said Monday. Moreover, the demand for physical silver is also very high owing to its wide use in industries including jewelry, solar panels, and electrical conductors.

Data suggests that almost 50% of the world’s silver is consumed by electronics, automotive, energy, pharmaceuticals and many other industries, but the supply and availability for recycling is limited. DSP believes that as the world shifts to renewable and cleaner energy resources, there is potential for increased demand, as silver is an essential raw material.

DSP Silver ETF would allow investors to buy the precious metal from a ticket of ₹5,000. The new fund offering (NFO) of the Silver ETF opens for subscription on August 1 and closes on August 12.

Furthermore, silver can also potentially act as leverage against a depreciating rupee. This is because silver prices in India are derived from international silver prices but are then converted after adding currency effects and other landing costs.

“Investing in silver through an ETF is a modern and smart way for investors to gain exposure to this precious metal in a simple digital form. Rising demand for silver across industries, newer technologies and The shift to renewable energy sources and safe-haven demand may also act as tailwinds for the metal. However, investors should expect fluctuations in short-term returns, particularly during periods of market volatility,” said Anil Ghelani, CFA, head of passive investments and products at DSP Investment Managers.

ETFs are a type of fund that are bought and sold similar to a stock market and the underlying asset in this case would be silver. The ETF price is tracked by an underlying index, here it will track the real world price of silver.

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