The New Inflation Trade ETF According to Experts

In the last few weeks, we’ve seen gold prices rise alongside stocks.

Yet, financial pros are paying more attention to silver and the iShares Silver Trust SLV ETF.

That’s rather odd, given silver’s somewhat benign relative performance.

But maybe there’s another reason why silver might be catching their eye.

Key Facts About SLV

• Net assets: $10.9billion
• 12-month trailing yield: N/A
• Inception: April 21, 2006
• Expense ratio: 0.5%
• Number of holdings: 1

SLV is a pretty straightforward ETF.

The custodian for the ETF (usually a bank like JP Morgan or Chase) holds a bunch of physical silver in massive vaults either in New York or London.

When you buy the ETF, you’re buying partial ownership of those assets.

Since the ETF is backed by physical silver, its price trades closely to the spot price of silver.

Source: iShares

Performance

Silver is more abundant than gold. Consequently, it’s used more often in manufacturing and industry. So, it’s price is tied more closely to economic activity than gold is.

Source: iShares

Although silver has an overall net positive return, its performance relative to markets and even to gold fluctuates dramatically.

For example, the similar gold ETF from iShares has a 10-year return of 58.42% but a 5-year return of 65.07%.

Competition

Speaking of the iShares gold ETF, it’s one of the top five most popular precious metal ETFs on our Trackstar list. 

Here’s how they all scored:

• SPDR Gold Trust (GLD): GLD is the most popular and widely traded precious metal and gold ETF. Like SLV, it issues shares against physical gold held in vaults.
• iShares Gold Trust (IAU): The IAU is essentially the same as the GLD, but from a different company, less volume and assets, but an expense ratio that is a little more than half of its peers.
• Aberdeen Standard Physical Palladium Shares ETF (PALL): If you want to own a piece of palladium, you should probably ask yourself why. But if you’re dead set on it, then PALL works the same as the one on this list that tracks precious metal prices.
• Credit Suisse X-Links Gold Shares Covered Call ETN (GLDI): The only one on the list that doesn’t track the price of a precious metal, GLDI gets creative and sells covered calls against gold prices. However, as an ETN, it doesn’t own any actual gold.

The chart below highlights something every decent financial advisor knows: simpler and cheaper works better.

From this list, the ETFs that outperform are basic gold and silver. And amongst those, the ones with cheaper expense ratios do better in the long-run.

Our Opinion 10/10 

SLV is the best ETF for owning silver.

Not only is it backed by physical silver, but it carries a reasonable expense ratio, decent liquidity, and options if you’re so inclined.

Plus, it’s a decent hedge against inflation without completely decoupling from the broader economy.

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