Silver might never hold a candle to gold. But that doesn't mean you can't put it to good use in your portfolio – and what better way than with the best silver ETFs.
Between the end of 2018 and the end of 2022, silver gained 52% in price, beating gold by more than 10 percentage points and providing wind beneath the wings of silver exchange-traded funds. But given silver's persistent placement in gold's shadow when it comes to financial media coverage, chances are this is the first you've heard about its solid outperformance.
Granted, silver is popular among investors, but it still doesn't come close to ol' Element 79. Consider that the iShares Silver Trust (SLV), the largest silver ETF on the market at roughly $11 billion in assets under management, is just one-fifth of the size of the largest of the gold ETFs: the $60 billion SPDR Gold Shares (GLD). And fewer silver funds are vying for those assets, no less.
Still, there are several reasons to consider investing in silver, even if it's just a small allocation.
"While gold tends to get the most attention, silver, along with platinum and palladium, is also an important piece of a precious metals portfolio," says Charles Sizemore, principal of Sizemore Capital Management. "While silver also has more industrial uses, and is thus somewhat sensitive to the economic cycle, it has also been a viable inflation hedge over time."
And several tailwinds are conspiring to lift silver higher in 2023.
"The price of silver and precious metals as a whole were suppressed by rising interest rates and a strong USD in 2022. However, silver demand still rose by about 16% from 2021 while supply only increased by 2%," says Stephen Gardner, director of ETF provider ETFMG. "We think this imbalance, which started in 2021, paired with the expectation that the Fed will pause rate hikes later in the year (weakening the U.S. dollar) will be a tailwind for the silver price."
What are the best ETFs for silver?
The pool for silver funds is relatively small. Using my professional experience as editor-in chief for Young and The Invested, as well as former senior investing editor at Kiplinger and managing editor at InvestorPlace, I looked for the best ETFs to buy that gave different degrees of exposure to silver. These picks include funds that own the actual metal itself, as well as those that invest in mining stocks.
If you're feeling bullish on this often-snubbed metal, here are five of the best silver ETFs to buy.
Data, including assets under management, dividend yield and expenses, is as of May 23, and is courtesy of Morningstar.
iShares Silver Trust
- Assets under management: $10.9 billion
- Expenses: 0.50%, or $50 annually for every $10,000 invested
For most investors, ETFs are a much better way to play gold, silver and other precious metals than actually owning the metal itself.
Rather than find someone to buy bars or bullion from, then arrange delivery, then find somewhere safe to store the metal, then deal with the difficulty of finding a buyer when you're ready to unload it, ETFs such as SLV allow you to buy and sell silver with the click of a button in your brokerage account.
Apart from being heavy and difficult to store, physical silver can also trade at a large premium to spot prices. Thus, for exposure to silver, "you might be better off buying an ETF or even playing the futures market," Sizemore says.
That includes silver ETFs such as the iShares Silver Trust (SLV, $21.51).
SLV, as mentioned before, is the largest fund of its kind and arguably one of the best silver ETFs to publicly trade the precious metal.
The fund, which launched in 2006, currently holds more than 480 million ounces of physical silver in its vaults, located in England and the U.S. Thus, SLV shares are a physically backed representation of the price of silver.
This method does share one downside with holding physical metals, which is that commodity ETFs backed by physical metals are also treated like collectibles from a tax perspective. In other words, if you hold for more than a year, you still don't enjoy the advantaged long-term capital gains rate, which tops out at 20% – instead, you pay a collectibles capital gains rate, which is capped at 28%. Thus, tax-advantaged accounts like IRAs are the best investment accounts for holding these kinds of funds.
Regardless, unless you're truly worried about an apocalyptic scenario, SLV and other silver ETFs will do just fine for most investors.
Global X Silver Miners ETF
- Assets under management: $942.2 million
- Expenses: 0.65%
Global X Silver Miners ETF (SIL, $27.70) isn't like the first name featured on this list of the best silver ETFs. Rather than investing in the metal itself, SIL invests in the companies that pull silver out of the ground.
Here's what you need to know about mining stocks: These companies extract ore and process it – and if they can do that at a lower price than what they sell that metal for, they produce a profit. So, if you own silver mining stocks that have low production costs while silver prices are increasing, you're typically in a good place.
The Global X Silver Miners ETF, which has been kicking around for more than a decade now, holds more than 30 companies involved in mining – some are actual miners, while others hold royalty or streaming interests in mining operations.
Top holding Wheaton Precious Metals (WPM, 26% of assets), for instance, currently boasts streaming agreements for 20 operating mines and nine development-stage projects. (Just note that like some of SIL's other holdings, it has exposure to gold stocks, too, so it's not perfect silver-mining exposure.) No. 3 holding Pan American Silver (PAAS, 9%) is a direct miner with assets throughout the Americas.
Mining ETFs tend to be pretty top-heavy, and SIL is no exception; more than half its assets are concentrated in the fund's top five holdings, including its massive overweight in Wheaton.
One last thing to note: Silver miners tend to be "jumpier" than silver itself, so when the metal moves, SIL often moves more aggressively in the same direction.
Admittedly, SIL receives a tepid Neutral rating at Morningstar. While the financial services firm applauds the fund's low cost, it believes the current management team is "inadequately equipped," averaging just "three years of portfolio management experience."
Still, for investors who want broad exposure to mining stocks, SIL is worth a closer look.
Abrdn Physical Silver Shares ETF
- Assets under management: $1.1 billion
- Expenses: 0.30%
If you want the oldest and largest silver ETF, SLV is your fund.
But you'll have to look somewhere else for the cheapest way to buy the metal.
Abrdn Physical Silver Shares ETF (SIVR, $22.47) is another physically backed silver ETF, this one significantly less expensive than SLV – fees are 20 basis points (a basis point is one one-hundredth of a percentage point) lower than iShares' offering.
There's scant difference between SIVR and SLV. Both are backed by physical silver, though in Abrdn's case, all the metal – in the form of silver bullion bars – is held in London vaults. SIVR shares represent an interest in that silver, minus the fund's expenses. And because the two silver ETFs track the same metal pretty closely, their charts tend to look almost identical – though SIVR has performed marginally better over time thanks to its lower expenses.
So why does SLV hold so much more in assets than SIVR?
Part of it is iShares' first-mover advantage (SIVR launched three years after SLV). But SLV is also a much more liquid fund, trading 19 million shares daily versus less than 1 million for SIVR. While Abrdn's fund has decent enough liquidity for buy-and-holders, SLV's superior liquidity is much more attractive to agile traders looking to get precise entry and exit prices from the best silver ETFs.
ETFMG Prime Junior Silver Miners ETF
- Assets under management: $682.2 million
- Expenses: 0.69%
Another way to squeeze more juice out of silver ore is so-called junior miners.
Traditional miners are exactly what you picture in your head: A team of people and machinery built to extract silver ore from the earth.
But how do they know where to dig?
Junior silver miners help point production companies in the right direction. They're actually tasked with discovering silver deposits, determining how rich their resources are, and sometimes they actually help get mines up and running. But their involvement typically ends there.
It's a high-risk, high-reward business, and that's reflected in the boom-or-bust movement of their shares.
The ETFMG Prime Junior Silver Miners ETF (SILJ, $10.03), which calls itself "the first and only ETF to target small cap silver miners," does do that … but it also invests heavily in traditional silver miners such as top holdings First Majestic Silver (AG) and Pan American Silver.
SILJ's modified free float market-cap weighting makes it so these types of miners carry a lot of heft in the fund, but it does hold some smaller players such as Canada Silver Cobalt Works and Kootenay Resources.
There's no denying this fund comes with plenty of risk. SILJ is rated Negative at Morningstar due in part to its struggle to "provide consistent returns for investors." Additionally, the financial services firm calls out recent turnover in management, which "can hinder the effectiveness of the investment process." Still, it notes that the current management team is "well equipped."
iShares MSCI Global Silver and Metals Miners ETF
- Assets under management: $178.6 million
- Expenses: 0.39%
The iShares MSCI Global Silver Miners ETF (SLVP, $10.41) is on this list of the best silver ETFs because it offers a somewhat different and less expensive option for investors interested in silver mining companies.
Like the SIL, the SLVP does have some interest in companies that mine not just silver, but gold and other metals. However, the fund's tracking index starts each rebalancing by targeting companies that primarily mine silver, then seeks out companies with gold and other metal interests. SLVP then limits the weight of large- and mid-cap gold companies to 5% of their market cap, then caps all issuer weights at 25%, then ensures all issuers with weights above 5% don't combine to exceed 50% of the fund's entire weight.
The result is a fund that holds more than 30 stocks, with Pan American Silver topping the fund at 23% of assets, and Hecla Mining (HL) at more than 13%. Some gold-focused miners, such as Agnico Eagle Mines (AEM) have floated to near 5% of holdings at times thanks to their price gains. Wheaton Precious Metals is an SLVP holding, too, but at less than 5% of assets.
This iShares ETF still offers imperfect silver-mining exposure. But it is 26 basis points cheaper than Global X's fund, if you value low expenses above all else.
Kyle Woodley is the Editor-in-Chief of Young and The Invested, a site dedicated to improving the personal finances and financial literacy of parents and children. He also writes the weekly The Weekend Tea newsletter, which covers both news and analysis about spending, saving, investing, the economy and more.
Kyle was previously the Senior Investing Editor for Kiplinger.com, and the Managing Editor for InvestorPlace.com before that. His work has appeared in several outlets, including Yahoo! Finance, MSN Money, Barchart, The Globe & Mail and the Nasdaq. He also has appeared as a guest on Fox Business Network and Money Radio, among other shows and podcasts, and he has been quoted in several outlets, including MarketWatch, Vice and Univision. He is a proud graduate of The Ohio State University, where he earned a BA in journalism.
You can check out his thoughts on the markets (and more) at @KyleWoodley.
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