Confused between gold and silver? Why not leave it for fund manager to decide

Thu July 17 2025

Despite gold ETFs delivering up to 32% returns in the last year, their shine is fading, while silver ETFs are outperforming with up to 18% returns in the past three months, compared to just 5% from gold ETFs. This shift has left investors confused about whether to choose gold or silver to diversify their portfolios.

To simplify this decision, a few mutual fund houses offer combined gold and silver funds. Two AMCs currently provide such funds, where the allocation between gold and silver is determined by the fund manager based on prevailing market conditions, macroeconomic indicators, and return expectations.

If you are wondering whether it is wise to diversify into both gold and silver funds instead of choosing just one and leaving the allocation to the fund manager, market experts say it depends on your investment style.

If an investor wants to actively manage their gold and silver exposure, they should opt for separate gold and silver funds. However, if they prefer a hands-off approach backed by a professional manager’s view, a combined gold and silver fund may be a better choice.

“If you want to actively manage your exposure to gold and silver based on market conditions, it makes sense to invest in separate gold and silver funds. This gives you full control, enabling you to adjust your allocation according to your market view. However, if you prefer a hands-off approach backed by a professional manager's view, you can choose a combined gold and silver fund where the fund manager decides the allocation between the two metals,” said Vishal Dhawan, CEO of Plan Ahead Wealth Advisors, a wealth management firm in Mumbai, to ETMutualFunds.

“Different AMCs offer varying allocation strategies, so you can select a fund that broadly aligns with your comfort level and objectives. Also, opting for a combined fund can help save on costs and taxes, as the rebalancing happens at the fund level and is typically lower compared to investing in separate funds, where the cost of rebalancing and associated taxes can be higher,” Dhawan added.

Another expert shares a different view, highlighting that diversifying into both gold and silver funds ensures investors are not overly dependent on the performance of just one metal and helps build a more balanced portfolio.

“Yes, diversifying into both gold and silver makes sense. While both precious metals tend to rally together over the long term, their short-term performances can diverge—as seen recently when silver lagged behind but is now catching up. Having exposure to both ensures you're not overly dependent on the performance of one metal and helps build a more balanced portfolio,” said Niranjan Avasthi, SVP, Edelweiss Mutual Fund, to ETMutualFunds.

In the last one year, gold ETFs delivered an average return of 31.97%, with ICICI Prudential Gold ETF offering the highest return at 32.43%, and LIC MF Gold ETF delivering the lowest at 30.46%.

During the same period, silver ETFs offered an average return of 20.49%, with Aditya Birla SL Silver ETF offering the highest return at 21.06%, and UTI Silver ETF FoF offering the lowest at 18.28%.

In contrast, over the last three months, silver ETFs gave an average return of 17.04%, whereas gold ETFs returned an average of 4.84%, showing that silver ETFs have recently outperformed their counterparts.

Two funds which are a combination of gold and silver, gave an average return of 26.62% in the last one year and an average return of 9.67% in the last three months. The two funds are - Edelweiss Gold and Silver ETF FoF and Motilal Oswal Gold and Silver ETFs FoF.

Data from ACE MF shows that Edelweiss Gold and Silver ETF FoF has more allocation in silver ETF and less in gold ETF whereas Motilal Oswal Gold and Silver ETFs FoF has totally opposite allocation which means more in gold ETF and less in silver ETF.

With the gold and silver combined funds standing at second position in the return chart in the last one year and last three months, investors are willing to know the advantages and disadvantages of investing in separate funds or in a combined fund.

Avasthi says that a combined gold and silver fund offers automatic rebalancing between the two metals, helping investors avoid emotional biases and tax implications associated with switching between them.

“It’s a simple, efficient way to participate in the overall precious metals theme. However, if you prefer to tactically allocate based on market trends, for example, overweight silver when it's undervalued, then investing in them separately offers more flexibility,” he added.

While separately sharing the pros and cons of investing in separate funds or combined funds, Dhawan said that pros of a combined fund is that the fund manager decides the allocation and different AMCs offer varying allocation weights, allowing investors to choose based on their preferences and also, costs and taxes are lower due to combined funds.

In case of separate funds, investors have full control over allocation and can adjust it based on market outlook to make tactical decisions and the cons include lower flexibility in allocation and higher expenses and taxes due to separate funds' rebalancing impact, Dhawan added.

According to a report by ETMarkets, silver has crossed Rs 1,14,000 in Indian markets for the first time—driven by a combination of global and domestic factors. Silver has posted impressive gains of over 30% this year, trading at nearly a 14-year high in international markets. For the first time since September 2011, silver prices have surpassed $39 per troy ounce, breaking through key historical resistance levels.

Another report mentions that in the last 2 days, gold prices have fallen by Rs 400.U.S. President Donald Trump’s higher trade tariffs on Canada and Mexico are supporting silver prices. Gold is also holding its key support levels amid uncertainty in the global markets due to U.S. trade tariffs.

Commenting on the outlook, Dhawan said that the outlook for gold and silver needs to be viewed in a balanced manner, especially as a safe-haven asset during periods of market volatility and with ongoing geopolitical tensions, global conflicts, and potential trade wars demand for precious metals is likely to stay resilient and silver might be more volatile than gold.

“Unlike gold, which is largely driven by investment and consumption demand, silver has a significant industrial usage. This dual nature also makes silver a good option to combine with gold. For INR-based investors, both gold and silver investments offer the additional benefit of potential gains from INR depreciation against the USD, amplifying returns over time,” Dhawan added.

He further added that given these factors, it's prudent for investors to maintain a strategic allocation to gold and silver or portfolio diversification and protection and investing through SIPs is suggested though, as the sharp outperformance vis a vis historical returns makes it prone to price and/or time corrections.

Gold and silver funds are used for portfolio diversification. If you have a large portfolio, you can earmark a small percentage of the total portfolio (advisors say around 10%) to invest in gold and/or silver. If you are starting out or you have a very small portfolio, you can give it a miss. Investors should remember that these funds wont offer you greater returns year after year. They are supposed to offer you diversification and add stability to your portfolio.

Gold ETFs have been around in the market for a long time now whereas silver ETFs are relatively new entrants in the market compared to gold ETFs as silver ETFs have been in the market since 2022.

Avasthi is of the opinion that gold continues to remain a strong hedge in an environment marked by geopolitical uncertainty, dollar weakness, and the combination of low growth and sticky inflation whereas silver, while also a precious metal, has an added industrial demand component, especially in sectors like green energy and electronics, and with tightening supply, the outlook remains robust.

Source: https://economictimes.indiatimes.com/