Walk through any Indian wedding market, and you will see gleaming plates, glasses and idols made of the white metal, bought as gifts and blessings. Many families now wonder whether to keep buying these items or move toward a Silver ETF for investment purposes. Others check the Tata silver ETF share price and ask whether electronic units could replace a cupboard full of vessels. The answer depends on what you want the metal to do for you.
The Cultural Case for Physical Ownership
Silver items hold sentimental value. Buying a set of anklets for a new born, a pooja thali for a house warming or a coin on Dhanteras can be seen as an expression of love and is part of the culture. They are bought with a view to blessing someone and should be encouraged.
However, there are some issues with buying physical silver. The cost of the articles will have labour costs added to it depending on how well made they are. When selling, you will also have to deduct waste, melting and purity costs. As such, there is rarely a return on the labour costs.
Physical Issues
White metals are not as valuable per kg as the yellow metal. As such, you will need a large amount of silver to have real value. This means you have more weight to carry around, it takes up more space and you may worry about storing it. Silver can tarnish over time and therefore needs to be cleaned. This can affect the resale value.
Heavy items can be hard to transport to your bank locker. It can cause concerns about theft if you are keeping them at home. You also have to insure them which can cause extra costs.
Benefits of Holding in Electronic Form
When purchasing through an exchange traded unit, you know you have a specific amount of bullion that has been stored by your custodian in a secure vault. As it is held in your demat account you do not have to worry about cleaning it. There is no stress of transporting it and no locker rental. The bullion must adhere to a certain level of purity. Your holdings will be independently audited.
You can purchase units from just 1 unit meaning it is a great option for beginners. You can see the prices during market hours and sell on any trading day. Settlement will be processed as usual.
However, you cannot give someone a gift from your demat. You will need a trading account and will need to be comfortable using online platforms. There will be costs associated with the fund such as an annual expense ratio, brokerage and spread.
Balanced Approach for Indian Families
You don’t have to go to either extreme. A sensible family may choose to:
Purchase a small amount of physical items for festivals, gifting and rituals.
Invest the remainder electronically to avoid any labour costs. Keep records of your items including weight, date of purchase and approximate value.
Review your total exposure once per annum.
This allows you to keep the traditional aspect but ensures you aren’t losing out on your wealth. It also gives you a clear idea of how much you have in total.
Amount to Invest
As the white metal can be quite volatile, it is best to keep your investment low. Many planners will suggest investing a small % based on your age, goals and how comfortable you are with the volatility. If you already have a lot of silverware in your household then you may not need to invest further.
Invest gradually. Investing a set amount each month will mean you are purchasing at various points in the price. This will take the pressure off. Using limit orders will help to keep your costs down. Compare funds based on expense ratio, tracking error and volume.
Taxes
Any gains from the listed units will be taxed based on how long you have held the units for. Rules have changed recently in the Union Budgets. When selling physical items, you may need different documents. Before selling, check what the current rules are using official guidelines/chartered accountant. Keep all of your bills and contract notes safe.
Tradition and Sensible
Silver will always have a place in Indian households, whether it be for your baby’s first spoon or the idol in your prayer room. Keep these purchases as a gesture of love. However, consider investing a smaller, regulated and transparent version of your money. By separating the sentimental from strategic aspects you are respecting tradition and making sensible decisions.