Silver ETF: A Guide

silver etfJust like gold, silver has been an investment metal of choice for years. Seasoned investors see the Silver ETF as another means to “diversify”. The silver metal is always shiny, but this shine dims rapidly when stocks come up stronger. In 2013 silver crumbled as stock markets gained strength and investors saw potential in currencies than commodities. Still, many investors love this precious metal.

Not only is silver precious and sought out, it can be a true lifesaver if various global currencies start to crumble. Not to mention, it can be a lot more affordable than gold, but provide lucrative returns. Lastly, there is no price on your peace of mind. Read on to find out why and learn how you can start to invest in a Silver ETF. Learn more about this investment option by learning the basics of ETF investing.

What Are Silver ETFs?

ETF stands for exchange traded funds. These are security baskets similar to mutual funds. ETFs invest in raw silver or raw silver assets principally. Silver ETFs differ from mutual funds in that they are traded all day round while mutual funds can only be sold or bought after the market close. Mutual funds are also not as flexible, making it difficult for investors to take advantage of the market fluctuations. ETF investors track the silver performance on the market throughout the day to spot a change in prices. Owning an ETF share means you own an ounce of silver even if you do not have the physical silver.

Silver ETFs investments are regarded as investments in the raw white metal itself. They are created by large financial institutions because they have enough assets to put together an ETF.

How Do Silver ETFs Work?

The company that put together an ETF decides which assets to include in their investment basket. Your financial management institution will then decide on the number of shares they will create and how much they will cost. Afterwards, the ETF plan is submitted for approval by the Securities and Exchange Commission (SEC). The ETF will then sell shares as creation units rather than individual shares. ETFs are divided into three types which are:

  • Future Based Silver ETFs.
  • Physical Backed Silver ETFs.
  • Mining ETFs.

The Physical Backed Silver ETFs are most appropriate if you are looking for silver bullion. Investors in this trust own an ounce of physical silver backed by every share they own. IShares Silver Trust ETF (SLV) is the most popular physical backed silver ETF. The trust boasts more than 10,000 tons of physical silver and more than $7 billion in assets.

Future Based Silver ETFs use futures to track the performance of the white metal on the market. The risks in this ETF are extremely high because the price values are bound by future contracts. The most well-known future-based Silver ETF is PowerShares DB Silver ETF. The fund boasts $37 million in assets.

The Mining ETFs track the index of global companies that mine, explore or refine the white metal. Global X Silver Miners ETF is one of the well-known mining ETF. The fund currently boasts $210 million in assets.

What Makes Silver ETFs a Sound Investment?

Because of the current economic crisis, many growing economies no longer have confidence in the several different currencies. Global inventors are looking to invest in assets independent of the American government. Though silver is not immune to market movements, it always bounces back a lot stronger because it has a variety of industrial applications than gold. While gold is used mostly in electronics and jewelry, silver finds its way in many fields including medicine, electronics and new media technologies. The numerous uses of silver make it a preferred investable asset.

The performance of silver is largely influenced by the industrial demand. Silver becomes strong when there’s an increase in demand. It is used in water purification systems, Plasma TVs, circuit boards, jewelry, Radio Frequency Identification Devices, mobile phones, solar batteries and photography. It is also aptly used in solar technology. Reports have surfaced that growth in demand for silver jewelry in India and China may attract even more ETF investors.

ETF companies like SLV have seen impressive growth ever since they open doors to investors. Since 1981 silver experienced its weakest showing in 2013. Nonetheless, this shows the potential of silver to remain stronger for longer even in volatile economic conditions.

How to Start Investing in Silver ETFs

There are a number of options available for investors. Investors can choose to buy shares in silver mining companies or enter into exchange-traded futures contracts or participate in physically backed or future based ETFs.

Investing in Silver ETFs is an effective and hassle-free way of investing in silver. ETF investors do not have to worry about the storage space and security of the physical silver. Because investing in silver is different from investing in bonds and stocks, you should spend some time assessing the market. Educate yourself by conducting internet research, and make the effort to watch how the precious metal performs on the market. It is critical to know the most profitable time to sell or buy.

For instance, investment advisers warn that it is not wise to sell or buy in the first ten minutes after the market opens or ten minutes after it closes. You can invest by using “cash in hand” or assets that you can to convert into silver. You can also stay on the market to assess daily market traders. Alternatively, you can find a financial management firm that specializes in ETFs to become a participant.

Just like any other type of investing, silver investments have no guarantee, and there are risks involved. Nonetheless, some financial commentators claim it is the best way to secure your retirement or financial future. It is predicted that silver will remain a preferred choice for investors worldwide because it is relatively affordable and easy to assess.  If you are interested in becoming an investing guru, you should enroll in these Udemy courses, Investing Fundamentals and A Walk Around the Market. Learn even more by reading this blog, Best Investment Plan: Identify Your Investment Goals and Options.