Small investors lose silvery edge
The markets, the winners contend, is about timing the market. Which essentially implies the right time to buy, and the right one to sell. Not once but possibly several times during an ongoing rally. Timing the market, say experts, is possibly the toughest thing to achieve. But what experience teaches us is that the small investors, the retail investors, are invariably caught on the wrong foot when they aim to gain from a rally. The large institutional traders perform better. A recent report by Vallum Capital proves this dictum, as it tracks the trading behaviours of the two sets in the booming silver market.
In the last four years, between January 2022 and February 2026, global silver prices went up by five times to $120 an ounce before they sharply corrected to $80 or so. During these 49 months, there was a long period when the price ranged within a band, followed by a slightly steady rise. Thereafter, within a few months, silver skyrocketed, and then suddenly crashed, at least compared to the heights. During these four phases, there was only one short phase of six months, when the decisions of the small Indian investors, and large global institutions, coincided.
What this implies is that while the institutions sold, the retailers purchased, and vice versa. In other words, when the institutions booked profits, and scattered away from the silver market, the small investors entered in droves, and vice versa. This is the story of divergent behaviour when it comes to silver-based ETFs (exchange-traded funds). One cannot say for sure but, according to the Vallum report, the hints are that the small investors lost, and institutions gained. We are not so sure. We feel that on several occasions, the small buyers did better. Let us analyse the four phases for a considered conclusion.
Phase 1 (January 2022-February 2025): Global silver prices roamed around in a sort of a band, as they moved between $24 and $32. As gold zoomed, and went on doing so after the pandemic, silver’s journey was more measured. Still, the savvy (large) investors entered ETFs in early 2020, or immediately after Covid, at a price of $14, saw the price rise to $50 in October 2024, and then settle down lower. For them, it was time to book profits. After all, what was on the table was 3.5x returns if they sold at the interim peak, or 2.5x if they sold around $35.
According to the Vallum report, quoted in the media, “Global institutional investors steadily reduced their exposure to silver ETFs, or made a structural exit. During this nearly-three-year-period, global funds withdrew $4 billion, with average outflows of $100 million per month.” Hence, they booked profits, possibly at the regular highs during the period, before the prices dropped, and then gained again. Possibly, they were unsure if the silver would ever touch the past peak of $50 that it achieved in October 2024. It was the experts’ opinion that silver had petered out, at least in the immediate future.
“In contrast, Indian retail investors gradually increased their exposure to silver. During the same period, domestic investors invested… (more than $1.5 billion) into silver ETFs, averaging… ($40 million) per month in inflows. In rupee terms, the net inflows were Rs 13,306.8 crore with a monthly average flow of Rs 350.2 crore. In simple terms, while global investors were exiting the asset class, domestic investors were beginning to accumulate positions,” states a media report. In other words, the buying of retail investors lagged the institutions. The former walked in late, even as the price corrected from $50 to $32.
Phase 2 (March-August 2025): During these six months, both sets of investors were on the same page. They were both net buyers. Global funds pumped in nearly $5 billion. Indian retail investors pushed more than $200 million a month, or more than $1 billion. “The report shows that both camps were bullish, both were buying, and the trade was working…,” stated a media report. It is here that the narrative changes, as per Vallum analysis, and as per commonsense and counter-logic. The former states that the global buyers had a plan. They knew, or were possibly aware that the next bullish phase, even bigger or as big as the first one, was around the corner. The Indians bought blindly.
We are not so sure. The fact remains that by the immediate past experiences, silver prices had crashed by more than a third from $50 to $32. During the six months under this phase, the prices climbed up gingerly, slowly, and incrementally to $39. Hence, there was no sense in dramatic buying unless one knew or was confident that prices would go up further. If the two sets did not, they were buying foolishly. If they did, it was one of the smartest moves by both. Hence, to say that the Indians were less smart would go against the grain.
Phase 3 (September 2025-January 2026): In these five months, silver prices almost trebled, from $42.5 to $120. Obviously, the global investors booked profits, as they had in the first phase, with potential returns of up to 3x. “They sold… ($3.5 billion) worth of silver ETFs, taking advantage of the surge in prices,” explains a media report. But the Indians kept on buying. They were on a momentum spree. The FOMO factor kicked in, and one of retail investors wanted to be left behind, as they were during the first phase, if they had bought silver in March 2020. In five months, they pumped $4.6 billion.
Of course, this does make the Indian small investors look like a herd, who walked in aggressively even as the silver prices peaked, reached its second high, and ended the second huge rally. But such a narrative assumes that the buyers were the same as the ones who purchased during the second phase. Maybe the third phase distinguishes between the smart Indians, and herd Indians. The former bought silver during the second phase, and sold in the third one. The latter missed the first two phases, and entered the market only during the third phase.
Phase 4 (February 2026): As silver corrected sharply to $80 or so, Indians sold after waking up from the FOMO sleep, coma, and paralysis. The global traders entered afresh, and invested $1.8 billion in February 2026. The jury is still out on who is or was smarter, as silver did rally briefly to $94, and fell back to below $80 in March 2026.
