In the past I’ve talked about gold funds in general, touching on how you can sub-categorize this general heading into the investments tied to spot bullion price, ETFs that are anchored to a basket of mining stocks, and mutual funds that choose given mining companies as their holdings. The same schematic applies to silver funds. The term silver funds is used to generically refer to any investment vehicle that is tied to either the silver metal itself, or else the companies that produce it.
Silver Funds Inevitably Fall Short
I have no choice but to candidly state that all of the silver funds are relatively unappealing to me, as I do not see them delivering superior returns in exchange for the fees they charge. That’s not to say I don’t believe they will be profitable in a bull market run. However, they all have their own unique liabilities that render them inadequate for me. Stated differently, they all have problems inherent in the business model that make it easy for me to outperform all of them.
In fact, I can beat all of the silver funds even if I buy the very same, exact underlying investments! As an example, assume someone chooses to go with something like SLV or SIVR because they want to play silver bullion. Silver can double, triple, or post a 1,000% gain from our point of entry, but the reality is that I will walk away with a higher, out the door return. The reason is that I can buy silver on my own, and all I pay is the premium between spot price and my purchase price. Plus, while there would ordinarily be a discount when I sell, I can skip the discount and sell at or above spot by simply selling to a third party, rather than a vendor, who would be happy not to have to pay the premium!
On the flip side, if you bought an ETF that “keeps” silver on your behalf, so to speak, you not only have the in and out fees on the transaction, but would also have annual expense ratios eating away at profit. I can win that game easily by just buying the metal and keeping it safe at home. That’s not to mention that I don’t have to deal with lengthy prospectus details that are daunting, questionable accounting, and so on.
Silver Funds With Silver You’ll Never Have And Companies You’ll Always Have
On top of that, always remember that ETFs are not really intended for you to ever get your hands on the metal they supposedly store anyway, and you can be confident of this fact by noting that many times physical delivery requires you accepting a 400 ounce bar. A four hundred ounce bar of silver would be quite pricy, and only the world’s wealthiest could even consider buying a 400 ounce bar of gold. As for me and my house, any money we put “in” silver needs to turn into silver “in” our own chosen storage facility so I can get my hands on it if I need it.
Likewise, the same deficiency theme plays out in the mutual funds and ETFs that focus on stocks, rather than metal. Your stock-based ETFs are tied to an index of pre-selected mining companies, but I want to be able to control what I own at all times. With these ETFs, you own whatever stocks are in the index, come hell or high water. To add insult to injury, there are always fees. But, on the other hand, if I own my stocks myself, then I’ll never own something that’s fallen out of favor. Plus, I merely have a single online trade commission to own it!
Silver Funds With Flexibility, But Fees To Go Along With It
Mutual funds may grant you the ability to find a fund manager you trust will actively trade the portfolio for real-time investment decisions, but the typical mutual fund drawbacks emerge to cloud the waters. You not only are restricted to trading at the end of the day, but also have to deal with ominous initial investment thresholds. To boot, there are always the fees.
At the end of the day, these silver funds are unnecessarily complex and inelegant, when I can just buy the bullion and stocks on my own, and it will be cheaper to own and post bigger end-game gains. I can emphatically say I would never want to “own” silver using something like SLV or SIVR. Nobody needs to “hold” my silver but me. Similarly, I see no need in anyone choosing the stocks I own, as with the SIL ETF, but me. I can buy anything SIL holds, and do so without all the fees and then have the freedom to exit a position whenever I want. As for the mutual funds, vehicles like USERX and UNWPX (the U.S. Global Investors mutual funds) force me to put too much money in one investment. On top of that, I lose the ability to respond, intra-day, to any market corrections that could be in progress whereby I might want to protect profits and temporarily sit on the sidelines. The only way to really have it all is simply to own the individual stocks that you choose, pay for once, and can shut down the party at the time of your choosing!