6 Silver ETFs at a Glance

While gold is the undisputed safe haven in turbulent times, its white-metal cousin, silver, does deserve some spotlight. Like gold, silver is one of the go-to commodities in uncertain times and is often seen as a hedge against inflation. However, since majority of the demand for silver comes from industrial use, its price is more dependent on the underlying industry demand and outlook.

From solar panels and LED lighting to touchscreens, RFID tags and cellular technology, silver is an essential component in many industries. The industrial usage of silver accounts for approximately 60% of its annual demand. Currently, 80% of the overall demand for silver is met by mining and the remaining through recycling.

Here's an overview of different kinds of exchange-traded funds (ETFs) that provide a convenient and hassle-free way to invest in silver.

The iShares Silver Trust (SLV) is the oldest and largest ETF that offers an opportunity to invest in silver. The ETF tracks the price of silver and is benchmarked against LBMA silver price. The underlying structure of the entity is that of a Grantor Trust, which holds physical silver and issues shares. The trust issues and redeems iShares only in blocks of 50,000 or integral multiples thereof, and a block of 50,000 iShares is called a “Basket.” At the time of its formation in 2005, an initial deposit of silver was made in exchange for the issuance of three Baskets. The trust only holds physical silver, and currently has 547,261,733.50 ounces of silver. The ETF has $13.03 billion as assets under management and an expense ratio of 0.50%.

Aberdeen Standard Physical Silver Shares ETF (SIVR) was launched in July 2009. Aberdeen Standard Physical Silver Shares ETF is issued by Aberdeen Standard Silver ETF Trust, which is a Grantor Trust as per its legal structure like SLV. The trust holds allocated physical silver bullion bars stored in secure vaults, which are inspected at regular intervals. SIVR does not indulge in future contracts and only holds physical silver. It is benchmarked against London Silver Price. The ETF currently has $1.01 billion as assets under management and an expense ratio of 0.30%.

While the ETFs from iShares and Aberdeen are backed by physical silver which is held by the custodian on behalf of the trust, there are other variations in silver ETFs as well.

Invesco DB Silver Fund (DBS) has a different structure. Launched in 2007, Invesco DB Silver Fund broadly tracks the movement of the DBIQ Optimum Yield Silver Index Excess Return Index. The Index is a rules-based one composed of futures contracts on silver. DBS provides an exposure to investors in commodity futures and involves higher risk, and hence is not suitable for all investors. The ETF has $20.65 million as assets under management and an expense ratio of 0.76%.

In addition, there is an ETF that doesn’t track the price of silver but invests in a range of silver mining companies. The Global X Silver Miners ETF (SIL) provides exposure to companies active in exploring, mining and refining silver. The ETF tracks the Solactive Global Silver Miners Total Return Index, which constitutes a minimum of 20 and a maximum of 40 members that are weighted according to free float market capitalization. By mirroring the index, the ETF invests companies engaged in silver mining across geographies such as Canada, Russia, United States, South Korea, Britain, Peru, Mexico and Australia. The ETF was launched in 2010 and currently has an AUM of $1.12 billion and an expense ratio of 0.65%.

There are two other ETFs that belong to the leveraged category of ETFs. ProShares Ultra Silver (AGQ) aims (on a daily basis) to deliver two times the daily performance of the Bloomberg Silver Subindex. The fund, which was launched 2008, currently manages assets worth $480.34 million and has an expense ratio of 0.95%. ProShares UltraShort Silver (ZSL) is an inverse-leveraged ETF. The scheme aims at delivering two times the inverse (-2x) of the daily performance the Bloomberg Silver Subindex.

While silver is more than a precious metal given its extensive use in fast growing industries, when compared to gold, silver is thinly traded and more volatile at times. On a year-to-date basis, silver has dramatically underperformed the broader indices. The metal is currently down by close to 12%. Investors who understand the dynamic nature of the metal can add silver as a portfolio diversifier.

Disclaimer: The author has no position in any stocks mentioned. Investors should consider the above information not as a de facto recommendation, but as an idea for further consideration. The report has been carefully prepared, and any exclusions or errors in reporting are unintentional. The ETF specific information such as AUM and holdings is as on November 25, 2021. Leveraged and Inverse ETFs are much riskier than regular ETFs.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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