Whenever the market experiences its cyclical cataclysms of heady ups and downs, leery investors turn to precious metals. It’s safe to say that 2016 was one of those years. That being said, there’s a good argument to be made for diversifying your portfolio with commodities such as silver, which is in high demand in many different industries: consumer electronics, automobile manufacturing, solar energy and housing, to name a few. (See also: A Beginner's Guide to Precious Metals.)
Actually owning precious metals, however, is a hassle many investors would prefer to avoid. ETFs offer an easy way to gain exposure to this relatively volatile commodity. Fortunately, there are several silver and silver-mining funds that do a good job of tracking the metal’s gains and losses. If you’re interested in adding silver to your portfolio, these three silver-backed ETFs are a good place to start. (See also: How Safe Are Gold and Silver Investments?)
All year-to-date performance figures are from the period January 1, 2016 through November 30, 2016. Funds were selected on the basis of both performance and assets under management.
1. iShares MSCI Global Silver Miners ETF (SLVP)
- Issuer: BlackRock
- Assets under Management: $63.1 million
- YTD Performance: 96.55%
- Expense Ratio: 0.39%
This fund aims to track the MSCI ACWI Select Silver Miners Investable Market Index and is closely correlated to the price of silver. The fund has a global outlook, investing in mining companies all over the world. It currently holds positions in 38 different companies in North and South America, Europe, Asia and Australia.
SLVPis a relatively new fund, with an inception date of January 2012. Its one-year and three-year performance figures are robust, at 87.33% and 4.38%, respectively. The fund’s reasonable expense ratio, especially for a sector-specific fund, also makes it attractive.
2. iShares Silver Trust (SLV)
- Issuer: BlackRock
- Assets under Management: $5.8 billion
- YTD Performance: 20.05%
- Expense Ratio: 0.50% sponsor fee
It’s important to note straight off that SLV is not a typical ETF. As the prospectus notes, “The assets of the Trust consist primarily of silver held by a custodian on behalf of the Trust,” which means that the fund will purely reflect the price movements of silver. You purchase shares in the physical silver held by the trust, and the fund charges you a 0.50% annual sponsor fee to hold it for you. If you want pure exposure to silver without storing bullion in your safe, this is the way to go.
The fund currently holds about 342 million ounces of silver in trust. Its one-year, three-year, and five-year performance figures are 17.81%, -17.61%, and -48.15%. Since its inception in 2006, the fund delivered returns of 29.75%.
3. PowerShares DB Silver Fund ETF (DBS)
- Issuer: Invesco
- Assets under Management: $65.7 million
- YTD Performance: 17.75%
- Expense Ratio: 0.79%
This PowerShares ETF is managed by DB Commodity Services, an Invesco (IVZ) subsidiary, and seeks to track changes in the DBIQ Optimum Yield Silver Index Excess Return using silver index futures contracts. The fund also returns interest on the U.S. Treasuries it holds in its margin account, which may cause its returns to vary somewhat from silver futures prices.
As with any futures-based ETF, this is a speculative and highly volatile instrument – definitely not suitable for every investor. The fund’s one-year, three-year, and five-year performance figures, at 15.03%, -8.37 and -14.76%, closely match the DBIQ Silver Index. Since its inception in 2007, the fund has achieved returns of 1.11%.