Digital silver: An emerging investment option

Observer

6 days ago

THE investment landscape is evolving. There are many investment options available, including bank deposits, mutual funds, stocks, bonds, debentures, government securities, chits, commodities, real estate, and cryptocurrencies.
Ideally, one needs to have a combination of at least a few of these to maximize the return, considering their risk tolerance and financial objectives.
Investment in gold and silver is considered safe and secure, in addition to being highly liquid. Investing in gold and silver can hedge against inflation and, hence, can be a prudent investment during turbulent times.
There are risks associated with physical investment in these, like purity, safe custody, damage and other related expenses.
Digital gold and digital silver are modern and convenient ways to invest in gold and silver without the need for physical storage. As said earlier, digital silver is an excellent investment option for portfolio diversification.
It is worth noting that over the past few years, silver has outperformed gold. While investing in virtual gold is good, investing in virtual silver is emerging, and it is considered an undervalued investment. Like gold, silver is also a rare commodity, and unlike gold, silver is widely used in the industrial sector.
Silver is a crucial component of solar panels, electric vehicles, and smart grid technology. Its demand is expected to increase. Currently, silver is trading at $38 per troy ounce in the international market and may cross $42. Price may go up further in the medium to long-term horizon, and a double-digit return is expected.
HOW TO BUY DIGI SILVER
There are different ways to buy silver in virtual form. When you buy virtual silver, you own real, high-purity (24 carat- 99.99 purity) silver, which is securely stored in insured vaults. Under this method, silver can be bought in small quantities at your convenience.
There is no risk associated with the purity or physical storage. You can buy silver in demat form through various platforms and instruments. The following are a couple of popular means of buying digital silver.
ONLINE PLATFORMS
Various banks, fintech companies, and investment firms offer the facility of purchasing virtual silver. You can easily do an online registration with them and start investing. This is flexible and convenient. The investment size can be very small.
Under this, the silver purchased in digital form can be redeemed in physical silver, cash, or ornaments/coins/bars/utensils, or a combination of all of these. In India, MMTC-PAMP (A joint venture of MMTC, a Govt of India undertaking versus PAMP, and a Swedish bullion brand) offers this facility. A large number of other fintech companies are also offering the buying and selling of digital silver.
SILVER ETFS
Silver ETFs (Exchange Traded Funds) are another option to invest in digital silver. A demat account is required for this purpose. A large number of ETFs are available. The ETFs can be bought and sold easily through the stock exchanges.
Here, the investment can be redeemed only in cash and not in physical form. Silver ETFs track the spot price of silver in the open market and the Net Asset Value (NAV) changes accordingly. The London Bullion Market Association (LBMA) mandated 99.99 per cent purity of silver and kept in a safe vault as backing.
Investment in digital silver is not about substituting other investments. It should find a place in your investment basket as part of a portfolio diversification.
Considering features of silver, such as its rarity, industrial usage, and undervaluation, investing in silver in electronic form can earn a robust return on your investment.
The interest rates of fixed-income securities are coming down due to the reduction of key policy rates by central banks. In this context, investing in commodities like digital gold and digital silver may be considered as an alternative.