Ajay : Last year, equities gave great returns. Especially small caps gave a return of 59% in one year, whereas gold and silver gave negative returns. I am going to shift all my investments to small caps for the next one year.
Niraj : That would be the most foolish thing to do. You know that every year, a different asset class would do well. The last year’s number 1, could be this year’s bottom performer. The small cap which was a top performer in 2017, was the bottom performer in 2018.
Ajay : Oh yes. You are right. So then how do we come to know which asset class would perform in next one year ?
Niraj : We can’t come to know that. That’s why we should diversify our portfolio. We need to have equities, debt, gold, silver, real estate everything in our portfolio in the right proportion.
Ajay : Ok. So I have diversified my portfolio across equities and gold. But why Silver ?
Niraj : Silver is both noble metal and an industrial metal. Apart from Jewelry, it has huge application across various industries like Electronics, Catalysts, Bearings, Medicine, Water Purification etc.
In Near Future, the demand of silver will be further increasing because of rise in 3 industries :
- Electric Vehicles
- Green Energy – Solar panels
- Semiconductor chips – 5G Technology
These 3 industries are expected to drastically increase the demand of silver by almost 8-10 times in next 10 years. And thus, Silver can add a silver lining to the portfolio.
Ajay : So are you suggesting that I should buy silver bars or silver coins ?
Niraj : You can buy them. But you would agree that holding physical silver has its own challenges – Purity, Storage cost, maintenance (silver needs regular cleaning) etc.
Ajay : So what is the way out ?
Niraj : I would suggest that you invest in a Silver Fund. This way, you will be able invest in silver, you will get the benefits of silver, but will not face the challenges of physical silver.
Ajay : O wow !! Do they have Silver Mutual Funds ?
Niraj : Fortunately yes. SEBI has recently given approval for Silver Mutual Funds. And In my opinion it can be a great addition to your portfolio.
Ajay : Thank you so much Niraj for clearing my doubts.
The Author Prof. Saurabh Bajaj (BE, MBA, FRM, CFGP, AFGP) is CEO with Nidhi Investments, Mumbai. His articles have a readership from 78 Countries across the Globe. He may be contacted on CEO@nidhiinvestments.com if you have any questions.
(The views mentioned in the article are personal opinion of the author)