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Silver: Just a Portfolio Diversifier

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"SIlver's rise has attracted investor interest, but putting all your eggs in one basket is never a great idea."

The consistent rise in silver prices—the highest among all other investment avenues—in the last few months, has invoked investors' interest in the asset.

Silver prices have returned 28.52% in three months, 67.78% in six months and a whopping 176.55% in two years. In comparison, the Sensex has returned negative over a six-month period and 86% over two years.

Reports suggest that going forward the commodity is likely to do quite well, the reason being that silver has dual use both as an industrial commodity and precious metal. Also, there are predictions that there will be a high demand from the Japanese electronic industry in the near future.

For retail investors, there are two ways they can invest in silver. For lump sum investors, there are the two commodity exchange platforms of MCX and NCDEX. One can buy in the spot or futures markets. In the futures market, one will have to initially pay only the margin fee.

The other, which is more retail-investor friendly, is the e-silver route. In addition, one can invest through the systematic investment plan (SIP) route—that is, buy small quantities on a monthly basis.

Also, to sell you can use the same NSEL platform. Interestingly, one can get physical delivery of the metal in various denominations of 500 g, 1 kg, or 5 kg at different centers.

Those willing to participate in the silver rush can look at this option, but only as a portfolio diversifier. Experts say silver is a high beta commodity. Invest some part of the overall portfolio say, 10%–15%, through the SIP route. Remember, putting all the eggs in the same basket is never a great idea.

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