Whenever the market experiences its cyclical cataclysms of heady ups and downs, leery investors turn to precious metals. While stocks have had a great run recently, uncertainty regarding domestic and international events continues to draw attention. 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. (For more depth, read our Beginner's Guide to Precious Metals.)
However, the price of silver has slipped in 2018, reflecting the broader decline in precious metals. But the price of silver has slightly lagged other precious metals this year and is currently trading at $14.22 per ounce, as of September 10, 2018, down more than 16% from over $17 an ounce a year ago. A volatile commodity, sensitive to day-to-day movements in the currency and equity markets, actually owning silver is a hassle that many investors would prefer to avoid.
Fortunately, exchange-traded funds (ETFs) offer an easy way to gain exposure to silver without owning the actual commodity. 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 related insight, read about how safe gold and silver investments can be.)
All the funds listed are down year-to-date 2018. As such, they were selected on the basis of both long-term performance and assets under management (AUM). All figures were current as of September 10, 2018.
The iShares Silver Trust (SLV)
- Issuer: BlackRock
- Net assets: $4.83 billion
- 2017 performance: 5.82%
- 2018 YTD performance: -14.63%
- Expense ratio: 0.50% (sponsor fee)
It is important to note straight away 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. Investors purchase shares in the physical silver held by the trust, and the fund charges a 0.50% annual sponsor fee to hold the silver. If you want pure exposure to silver without storing bullion in your safe, SLV is the way to go.
The fund currently holds about 320 million ounces of silver in trust. Its one-year, three-year and five-year performance figures are -18.02%, -0.82% and -9.59%, respectively. (Read more about how investors are betting on silver.)
- Issuer: BlackRock
- Net assets: $50.58 million
- 2017 performance: 4.58%
- 2018 YTD performance: -22.02%
- Expense ratio: 0.39%
This fund aims to track the MSCI ACWI Select Silver Miners Investable Market Index, and it 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 30 companies in North and South America, Europe, Asia and Australia. The fund is tilted toward large-cap mining companies. Canada-based Wheaton Precious Metals Corporation (WPM.TO) accounts for over 21% of its holdings.
SLVP is a relatively new fund, with an inception date of January 2012. Its one-year, three-year and five-year performance figures are -26.65%, 12.18% and -8.68%, respectively. The fund's reasonable expense ratio, especially for a sector-specific fund, also makes it attractive. (Read more about the world's top five silver mining companies.)
Global X Silver Miners ETF (SIL)
- Issuer: Global X
- Net assets: $346.4 million
- 2017 performance: 1.67%
- 2018 YTD performance: -24.42%
- Expense ratio: 0.65%
For a different take on silver, this ETF tracks an index of global silver mining companies. It is definitely the dominant player in the space, with exponentially more in AUM than its competitors. With average daily volumes of approximately $2.74 million, SIL has the liquidity to reassure investors looking to enter this relatively volatile market. However, expenses are also higher than straight silver ETFs. There are currently 23 equities in the fund's portfolio.
The fund's one-year, three-year and five-year performances reflect the trends in silver and come in at -29.56%, 7.93% and -10.92%, respectively.