Realistic Returns With Silver ETF Investments


Elsewhere I’ve discussed how a gold ETF can be viewed as just one of many forms of gold funds, and the same holds true in a Silver ETF discussion as well.  Of all the possible types of silver funds, a popular variety is the silver ETF investment that that tracks the price of physical silver.  In addition, there are silver mutual funds, that hold gold and silver mining companies.  And there are the silver ETF products that are anchored to silver mining companies and function in some ways like a mutual fund, but have distinction such as the fact that it trades like a stock.  There are folks out there who do not like mutual funds, and so it’s important that I discuss the ETF options.

Silver ETF Spotlight – SIL

A pretty good silver ETF is SIL, the Global Silver Miner’s ETF.  This is tied to the Solactive Global Silver Miners Index, which is a basket of approximately 25 silver mining companies.  This may sound diversified, but just a handful of these companies actually accounts for half of the holdings.  There are well-known companies like SLW (Silver Wheaton) and PAAS (Pan American Silver), of course.  There are a lot of Canadian companies, as would be expected, as well as a mix of others from around the world.

SIL allows all the convenience of ETFs, like intra-day trading, availability of options, and real-time quotes.  The expense ratio is 0.65%, which I find a bit pricey, although it’s still less expensive than a mutual fund.  By tracking a broad basket of stocks, there is some diminished risk.  However, there is constrained upside movement at times as well.  A core holding, SLW, was up 8% at one point while SIL was actually down, posting a loss due to other holdings.

Silver ETF Provides Limited Control

All of this evinces why I’m not crazy about being married to an underlying index of stocks.  I don’t want to be tied down and unable to trade away bad decisions or short-term laggers.  If the stocks were in my portfolio singly, I could have kept Silver Wheaton and ditched the under-performers.  There’s no replacement for having a high degree of control over what you own at any given time, and I see no advantage to being prevented from hand-picking stellar companies for higher returns than ETFs, as I’ve repeatedly done on my own.

Silver ETF Alternative For Greater Stock Selection Flexibility

Of course, if you are not comfortable making your own picks, then you will need to get some advice from a seasoned resource investor, or otherwise go with the pre-chosen batch of companies someone else put together.  If you go with a pre-made buffet, it’s best to know the person in control can make changes, so you might look to a mutual fund after all.  You won’t have access to options, but then you’re likely not looking to trade options anyway.

Thus, if trading at the end of the day, when NAV is established, is okay by you, you might look to USERX or UNWPX (the U.S. Global Investors funds).  USERX offers larger producers, while UNWPX gives a fifth of all assets under management to exploration companies to attempt to participate in the parabolic gains smaller companies can achieve.  Each of these funds touts award-winning management, and they can change holdings at will.  At the same time, mutual funds are far more expensive to own than stocks, and my experience shows you’ll be leaving money on the table in missed returns as well.