Commodities like aluminium, copper, zinc, gold and silver witnessed huge correction post covid as fear of unknown took hold of the markets. Whilst the demand recovery for commodities has been much stronger and faster than supply normalisation across the globe, the prices of commodities such as silver and gold haven’t gone up so sharply.

Today we talk about the silver lining, an opportunity in silver funds. Silver as a commodity is a tangible asset which has diverse industrial applications. It is used in renewable energy, jewellery, and in the form of investments. It is widely used in specialised electronic equipments – it is an excellent conductor of electricity, even better than copper. Supply of silver fluctuates in tandem with demand of other metals; however demand is heavily influenced by industrial manufacturing outlook.

Investments in silver can efficiently be made in 2 ways – silver ETFs, which are trading on the exchange & through Silver Fund of Funds (FoF). The benefits of both are – hedge against inflation, diversification, trading flexibility, store of value, no storage cost, convenience to buy in small quantities, no wealth tax, 99.9% pure & no making charges.

The terms blue-chip stocks and blue-chip funds are frequently used in the context of investing and the stock market. A blue-chip stock is ideally associated with strong management and long-term performance rather than high returns.

These firms have stable businesses, a strong brand name, and a proven track record of delivering long-term, consistent returns. In the Indian context, blue chips include Tata Group, HDFC Bank, SBI, ICICI Bank, Reliance, Infosys, and ITC.

A blue-chip fund is a mutual fund that invests in blue-chip stocks.

Why should you invest in blue-chip funds?

·       Due to the fact that these funds invest in blue-chip businesses that are closely monitored by analysts and fund managers, there is increased corporate governance and oversight.

·       Blue chip stocks are extremely liquid in the market, so they can be bought and sold in large quantities, making them highly liquid even during times of high volatility.

·       Blue chip stocks lower portfolio risk by adding stability, and they are less volatile than smaller and mid-sized enterprises.

·       Blue-chip funds may not give as high of returns as mid- and small-cap funds, but they do provide more stable performance with less volatility. Such funds may not make a lot of money in a bull market, but they also don’t lose a lot in a bear market.

Rights issue is an offer made by the company to its existing shareholders to subscribe to additional equity shares at a discount. The primary reason for such issue is the infusion of capital (more money) which may be needed by the company for its operations or to pursue any M&A activity. It may also be used to increase the capital base of the company, which may arise in case of regulatory requirements. The shareholders who get the right can either subscribe to the shares at the discounted price, or may also trade the right in case they do not wish to subscribe to it.

Share split is splitting of face value of the share of the company into smaller value. This is generally undertaken to increase the liquidity of the share in the market as the number of shares increase (usually meaning that more retail shareholders can buy the share). Consequently, the shareholders now have additional shares in the company and the price of the shares are adjusted downward to adjust for the split.

Bonus issue is the process of giving an additional share to the existing shareholders of the company without any additional cost in the specified ratio. Therefore, the shareholders get additional shares in the company at zero cost. Much like share split, the market price of the shares adjusts to reflect the additional shares.

While both share split and bonus issues do change the value of the underlying company, many a times these announcements cause a temporary euphoria in the share price of the company.