ETF Talk: Which Silver ETF Shines the Brightest?
Despite this month’s massive pullback, silver is a commodity that offers a hedge against inflation and a chance to ride a potential rebound in the price of the shiny metal. It may turn out that the selling momentum that dragged silver down in recent weeks was little more than an overdue market correction after the huge run-up we witnessed in the preceding months.
Plus, silver is more than just a shiny precious metal, as it is used in many electronics and medical devices. Such industrial uses add to the demand for the precious metal. I am not yet ready to recommend silver as an investment just due to the recent retreat, but I do want you to consider preparing to buy it once the current pullback ends.
When it comes to silver, there are two main ETF choices. Of course, these silver ETFs are not created equal. In fact, silver miners and silver bullion are not growing and falling at the same rate.
After falling to its 2011 low in February, the bigger and much more heavily traded iShares Silver Trust (SLV) surged more than 80%. It then pulled back sharply as May began, losing a substantial amount of its value. The Global X Silver Miners (SIL), in contrast, enjoyed a nice move higher off of its January low, but not to the degree that SLV did. The fund also has come down in May, but not as sharply as its sector brethren.
Other than performance, the two main differences between SLV and SIL are in what each fund holds. In SLV, you’ll find real, tangible silver bullion. The fund is pegged to the spot price of the metal. SIL is a fund that represents a basket of companies that mine silver, as well as other metals.
As of this writing, the top holdings in SIL are Industrias Penoles CP, 12.94%; Silver Wheaton Corp., 12.27%; and Fresnillo PLC, 9.10%. Industrias Penoles not only mines silver, but zinc, lead and bismuth. Many of these metals have not had as wild of a ride as silver, and that partially accounts for the relative lack of volatility in the fund versus SLV.
If you have an appetite for risk and a stomach for enduring wild price swings, then commodities offer a viable investment opportunity for you. With silver’s recent fall, it offers a chance to profit whenever the metal resumes an upward climb. Rather than rely on just one silver ETF to tap, you may want to consider both SLV and SIL when you think that silver is ready to rebound.
