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Should You Buy Silver ETFs? | Silver Investing | Vijay Bhambwani - YouTube
Channel: Equitymaster
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hello friends this is vijay bembani here
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i'm back with you in this video to
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basically discuss about uh a very
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exciting uh a new investment opportunity
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that we have
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in india after a very very long waiting
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period
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i hope my videos have uh made you a a
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better 360 degree worldview trader
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especially in the last couple of weeks
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i've recorded videos like how to analyze
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sugar stocks
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in the background of
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the cyclicality of the crop and then
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alcohol stocks in the background of
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cyclicality of sugar and then what to
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look for in a good hotel stock uh
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basically
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a macro view of what's happening i'm
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particularly excited about the video
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that i made about a boom coming up
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thanks to the
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comprehensive economic partnership act
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between india and uae
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and the bonds getting listed overseas
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now
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obviously a lot of my viewers
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are a little anxious about whether
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all these issues will impact the
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investment in bullion that they have
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made so far and
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more importantly after almost two
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decades of waiting we are now being
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offered a silver etf and exchange traded
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fund in india and whether it's a good
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idea to invest in the silver etf
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so let me take this one step at a time
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uh initially i said gold would jump by
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31st december 2021 which i later
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modified to 2022 for the simple reason
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that
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the kind of inflation that i was
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expecting was not happening
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by the end of 2021 as per my statistical
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models so more than two quarters ago i i
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shifted the goal post and i said look
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it's not happening in 2021 uh there's a
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better probability in 2022 31st december
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if you are monitoring what's happening
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in the world around you you're basically
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seeing what's happened in china
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there's been an economic
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credit crisis rather which is spiraling
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out to the economy by itself which means
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that the chinese insistence on having
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the chinese currency as one of the
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global reserve currencies
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is going to be pushed back for a while
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so it is the us dollar as a primary
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global reserve currency then you have
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the euro the japanese yen etc etc
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which means in the currency space the uh
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the room has just gotten smaller
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secondly with the spikes in fuel prices
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with the way natural gas and crude oil
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prices are jumping
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also disruption in the supply chain
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thanks to the economic uh distress in
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china there is going to be a good deal
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of impression which is good for both
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gold and silver
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so this is something that i was betting
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on and
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slowly
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but surely i'm seeing events unravel
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unfold in front of my eyes which is what
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i had anticipated
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to be very honest
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any investment
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call
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any investment or trading view
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sometimes hits the mark along expected
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lines sometimes it takes a little while
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longer and there are times when it
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actually misses the target completely
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that's the way the investment world is
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nobody and i have never claimed to have
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a magic wand which can address all
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issues and hit bullseye all the time
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so
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the element of time is what has got
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stretched out in our boolean investment
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but
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i'm
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quite confident that the inflation that
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i was expecting is coming it's just the
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waiting period that is a variable here
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that's settled let's now go to where the
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uh
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silver etf is headed and whether you
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should be investing money in it or not
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now first of all
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i stand by my view that silver in
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percentage terms if you are okay with
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the idea of tolerating higher volatility
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now for example how much of a higher
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volatility you will actually have to
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bear with when you're investing in
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silver
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if gold goes up hypothetically over a
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long period average lpa i'm talking of
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lpa long period average if gold goes up
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or goes down by one percent silver tends
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to go up and go down by 1.28 to 1.30
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percent so ballpark it's about 28 to 30
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percent more volatile than gold
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in rallies it rises higher in declines
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it falls faster
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but net net
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inflation will help silver so we figured
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out for ourselves that silver is a good
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buy
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and whatever i have said about silver
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being used in the 5g industry all you
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need to do is basically google search
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you cannot have a fifth generation gsm
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[Music]
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mobile internet connectivity without
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deploying silver in the switching
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systems
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electric vehicles you need the silver in
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each and every vehicle
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internet of things you know
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you can't do without silver photovoltaic
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cells or solar cells you can't do
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without silver so all the past videos
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about why silver should go up because
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it's an industrial application come
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a hedge against inflation and a store of
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value remain on track those arguments
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remain valid as ever
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so silver should be invested in now
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whether you should invest in the etf
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i think the silver etf makes sense for
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the simple reason that if you were to
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hypothetically invest say about a crore
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of rupees in bullion
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all it would take you
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is two kilos of gold or less to deploy
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one crore rupees
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right now when it comes to silver at
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approximately 60 000 rupees per kilo can
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you really imagine uh pumping in uh
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more than a quintile quintal and a half
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now that is a problem
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that is a problem you'll have to buy 150
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kilos of silver to deploy a crore
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and storage then becomes a problem of
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course there are private and
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public sector banks and even non-banking
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institutions that allow you storage
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facilities by way of
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commercial vaults that they give you on
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rent but believe me it adds on to the
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cost month after month
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year after year then of course there is
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that fear of uh theft silver being
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bulkier you can't really move it around
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with you if
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you were to buy a kilo of gold it will
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be it will be something of this size
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it's called cadbury in zaveri bazaar in
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mumbai for the simple reason that it
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looks like a bar of cadbury chocolate
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coated in the golden color
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aluminium foil
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so one cadbury can easily fit into your
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pocket just like a cell phone is and you
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could carry around one or two cadburys
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on your person are you moving around
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with a crow and a half maybe even two
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crores on your person nobody's would be
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any wiser but
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try carrying around a crore worth of
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silver around you and you know what i
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mean so etfs solve that problem now the
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other issue about silver is
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because it is more volatile
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the spread now when i talk about the
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spread i mean the difference between the
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buy price and the sale price now if you
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were to go to zaveri bazaar if you were
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to go to a pedi a payday is a
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traditional shop which buys and sells
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silver mostly a wholesale shop now
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wholesalers are cheaper to buy and sell
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to
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okay so the spread between
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a gram of gold
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would be nothing more than 120 to maybe
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150 rupees per gram so if you were to
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buy and sell that the spread would be
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150 or 220 rupees that's very very
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affordable
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and since people don't really buy large
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quantities of
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gold uh that 120 bucks is actually not
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really much
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but in silver
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when you try to buy and sell a kilo of
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silver remember kilo would be nothing
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more than approximately ballpark 60 000
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bucks so most investors would be able to
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deal in silver in multiples of kilos
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the spread could be anything between
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[Music]
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1200 rupees to 3000 rupees per kilo
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now that kind of spread means somebody
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is eating away somebody is hacking into
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your profits and pocketing it just by
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way of bid and offer spread or the buy
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and sell difference
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all right now that is very unaffordable
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plus again you have gst on silver which
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you are paying
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when you buy
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and when you are selling unless you have
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a registered
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dealer's number
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which is a registration number with a
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boolean merchant's association
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you will be deemed as an unregistered
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dealer or a urd and you would lose out
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on a certain portion of these
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transaction costs so buying and selling
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silver in physical unless the price
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really jumps up 30 40 50 60
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will be a little less economical as
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compared to silver etfs
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here you will buy it just like an equity
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share in the stock exchanges in the
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secondary markets and
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bid and offer spreads will obviously be
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a lot more smaller as compared to the
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physical aspect in zaveri bazaars or the
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gold bullion market
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every city in india would have its own
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bullion area where people go and buy and
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sell jewelry and raw bullion also so the
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bid and offer spread and silver taken
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care of now
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we basically come to the uh unit cost
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now in the gold etf and by the way gold
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etf market
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has a corpus of 16 350 crores if my
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memory serves me right
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and
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these figures are up to end of august
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2021. that's how big the gold etf or the
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exchange rated fund market is in india
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the silver market can be a lot more
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bigger for the simple reason that silver
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is a poor man's gold
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all right so
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uh sil a gold is traded in multiples of
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one gram in most cases but you also have
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some funds
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uh exchange traded funds where you are
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trading gold in less than a gram
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all right so
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silver when you go to zebra bazaar if
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you want a bar you are most probably
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forced to buy a kilo of silver whereas
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in the etf we don't know i'm not sure of
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the denomination yet but if
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affordability is any benchmark to go by
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i would think
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that you should get at least 100 grams
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in multiples if not smaller if not
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smaller so then it becomes a very
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affordable issue and therefore you can
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buy silver in fractions of those bars in
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javi bazaar you are forced to buy a kilo
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but in the etf you would definitely be
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able to buy a whole lot smaller pieces
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which means that doing an sip or
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systematic investment plan in silver
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using the etf route suddenly becomes a
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whole lot more viable
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no storage cost because the etfs are
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going to lie in your dmat account just
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like any other stock no fear of theft
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and you can basically uh transact from
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the comfort of your cell phone your
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broker's mobile trading app you can
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simply transfer those etfs so it's like
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carrying a few hundred kilos of silver
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in your pocket digitally of course
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it basically then equates silver with
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gold where you can carry a few bars of
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cadbury bars of gold as it is called in
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the very bazaar parlance you could
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basically carry a few hundred crores
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worth of silver in your pocket using
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your cell phone
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so
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net net i think the advantages of etf in
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silver outweigh
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the worries and therefore i think yes
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you should go ahead and invest in silver
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etfs as and when they are available they
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are backed by physical silver with a
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third-party custodian so when you are
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owning say hundred grams or thousand
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grams or maybe 10 kilos or 100 kilos of
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silver remain assured that much silver
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in your name is lying in a
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custodian's
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and key somewhere and
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to that extent you can sleep peacefully
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in the night
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friends on this cheerful note i bet
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goodbye to you not before reminding you
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to click like on this video if you liked
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what you saw subscribe to my youtube
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channel if you haven't already done so
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click on the bell icon to receive
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instant alerts about fresh videos being
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put up out here good bad or ugly i'd
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love to hear from my viewers so please
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keep the lines of communication open do
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comment on my videos
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and help me reach out to fellow
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like-minded investors and traders by
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referring my video to your family and
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friends
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thank you for your patience i wish you
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have a very very profitable day ahead
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this is vijay bambani signing off for
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now take care bye
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