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Proprietary Data Insights Financial Pros Silver ETF Searches in the Last Month
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ETFs |
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Interest in This ETF Surged After Elections |
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U.S. elections dominated the news cycle for the better part of the last six months. Now that they’re behind us, something unusual came to our attention. Typically, a “red wave” boosts stocks. Commodities rarely see much action. Yet our proprietary Trackstar database picked up a surge in search activity among commodity ETFs. Within the group, silver ETFs stood out with the highest surge in interest. That’s odd, particularly since silver trades like both a precious metal and a stock largely due to its heavy industrial usage. Within the silver ETF subset, financial pros searched iShares Silver Trust (SLV) more than any of the others. So we took a look under the hood to test the ETF’s “metal.” Intro to iShares Silver Trust SLV is the largest publicly traded silver trust. It gives investors exposure to the silver bullion market and offers convenient and cost-effective access to physical silver. SLV buys and sells silver bullion, which it holds in a trust and stores in a vault. It’s not an investment company registered under the Investment Company Act of 1940. So it’s not subject to the same regulatory requirements as mutual funds or ETFs that are registered under that law. Here are some key facts about SLV:
Shares are redeemable only in large aggregated units called “Baskets.” As the SLV site says, “Only registered broker-dealers that become authorized participants by entering into a contract with the sponsor and the trustee of the Trust may purchase or redeem Baskets.” So if you thought you could trade in shares for physical silver, you’re out of luck. Performance Since its inception in 2016, it’s delivered an average annual return of 2.2%. Over the last 10 years, it would have returned an average of -6.3% per year. That doesn’t make it a great long-term investment. And since the price of silver is tied to its industrial usage, it doesn’t act as a hedge against inflation as well as gold does. Fees Generally, ETFs charge an expense ratio to run the fund. But since SLV is technically a sponsor, it charges a sponsor fee of 0.50%. That’s not bad, but it’s not cheap either. Trading SLV SLV has options ranging from weekly to LEAPS. On average, 19.4 million SLV shares trade daily. Its high liquidity and volatility make for great trading. Competition While SLV is the largest silver trust in the market, investors have other options for gaining exposure to silver. They include abrdn Physical Silver Shares ETF (SIVR), Invesco DB Silver Fund (DBS), Sprott Physical Silver Trust (PSLV), and iPath Silver ETN (SBUG). Portfolio Composition SLV, SIVR, and PSLV buy and sell physical silver, while DBS and SBUG invest in silver futures. Investing in silver futures is less desirable than owning physical silver because of the rolling mechanism. For example, futures prices are usually higher in the forward months, meaning the fund will sell at cheaper futures contracts and roll into more expensive ones to avoid delivery. This is less efficient. Fees
Fees vary across the board, with SIVR the lowest at 0.3% and DBS the highest at 0.75% Note: SBUG shows no expenses. However, we believe that there are other costs associated with the fund. Performance The best performer of the group is SIVR at 2.36%, followed by SLV at 1.94%.
Our Opinion 5/10 Silver underperformed over the last five years as a buy-and-hold investment. However, it does offer investors diversification from equities and real estate. You’d think it would be doing better with rising inflation, but it has yet to meet expectations. SLV and SIVR are the best two funds in the group. A small allocation in either works in a portfolio for diversification only. If you want to make speculative bets, futures are a better choice. |
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