25 Ways to Invest in Silver2015-06-24
Silver has become an increasingly popular safe haven option as it comes with a cheaper price tag and a laundry list of practical uses in comparison to its sister precious metal, gold. Whether you’re looking to make a play on silver, or are just interested in diversifying your commodity holdings, we outline 25 viable options for adding exposure to silver.
Exchange-Traded Funds (ETFs)
ETFs have been extremely effective for helping to spread commodities to a number of different investors. While it used to be that only futures traders were able to access this asset class, ETFs have helped the average investor gain exposure to something like physical silver in their portfolio with just one simple fund. When it comes to silver exposure, there are ETFs for nearly every segment of the silver market, including physical bullion, futures, and mining stocks [see also Gold ETFs Shine, Silver ETFs Shine Brighter]:
- Silver Trust (SLV): Without a doubt the most popular silver ETF and arguably the most popular way for investors to access this metal. SLV offers exposure to physical silver, straying from the complexities and issues associated with silver exposure through futures or stocks.
- Physical Silver Shares (SIVR): This fund also tracks physical silver bullion, making it a direct competitor to SLV. This ETF, however, undercuts its competition by 20 basis points when it comes to fees, creating an ultra-cheap option for silver exposure.
- Silver Miners ETF (SIL): This product offers exposure to a number of popular silver mining, refining, and exploration companies from around the world. Note that this ETF will represent a leveraged play on the metal, as miners typically have high betas in comparison to the underlying metal.
- UltraShort Silver (ZSL): Utilizing a futures strategy, this product seeks to return -200% of the daily performance of silver. While this fund is subject to wild swings, its returns for September of 2011 came in at approximately 37%, which made for a unique opportunity.
- Ultra Silver (AGQ): This product applies a 2X leverage to silver using forwards and futures to complete its task.
- DB Silver Fund (DBS): For those looking for exposure to unleveraged futures, DBS is your fund. This product simply aims to follow a rules-based benchmark that utilizes futures to reflect the performance of silver.
- E-TRACS UBS Bloomberg CMCI Silver ETN (USV): This ETN invests in silver futures, but rather than offering exposure to only front-month futures, USV spreads its holdings across a number of contracts that mature anywhere from three months to five years out. Also note that because this is an ETN it will not encounter tracking error, but it will be at risk of its creditor.
- Pure Beta Precious Metals ETN (BLNG): This ETN uses a relatively unique methodology by investing in a basket of futures contracts on precious metals. Don’t let the name fool you, however, the product is split about 80/20 to gold and silver, with nothing left for platinum or palladium. This may be a good fund for those who are marginally interested in silver, but are more comfortable with gold.
- Physical White Metal Basket Shares (WITE): WITE invests in all precious metals with the exception of gold. Offering physical, weighted exposure to silver, platinum, and palladium, this may be a good product for those who like precious metals but are not necessarily married to any particular option.
- Physical Precious Metal Basket Shares (GLTR): Similar to WITE, this fund offers physical exposure to precious metals, this time including gold along with silver, platinum, and palladium.
Investing in the equity side of the equation isn’t a pure play on the metal, but it can make for a number of interesting opportunities that other investment vehicles simply don’t offer. Equities that focus on metals will most often consist of mining, exploration, or refining companies that can offer a number of advantages over other options. A fair amount of these companies offer strong dividend options and high liquidity for traders of all kinds [see also Three Reasons Why Gold Is Overvalued]:
- Silver Wheaton (SLW): Perhaps the most popular silver stock, SLW is the world’s largest silver streaming company. Silver streaming is the process by which one company purchases a mining firm’s silver production to refine and distribute the silver. As silver is a typical by-product of mining, a number of companies benefit from selling the silver to other streaming firms, especially if their business model is focused on something like copper.
- Pan American Silver (PAAS): Founded in 1994, this mining company is stationed in Vancouver, British Columbia but runs operations all over the world with its target metal being silver.
- Silvercorp Metals Inc. (SVM): Though this company is based in Vancouver, it primarily focuses on operations in China and is the leading silver producer there. Due to its heavy ties to China, the stock should also be thought of as something of an emerging market play, as policies and trends in the developing economy can have a major impact on the company.
- Silver Standard Resources Inc. (SSRI): SSRI explores, develops, and produces metals including silver, gold, lead, zinc, and copper throughout the Americas.
- First Majestic Silver (AG): Another small-cap play, First Majestic engages in the production, exploration, and acquisition of silver with a focus on Mexico. The company owns a number of other miners, one of which is home to mining areas amounting to nearly 70,000 hectares.
- Great Panther Silver (GPL): Great Panther Silver focuses its operations in Mexico and also produces gold, lead, and zinc, giving its investors exposure to multiple metals.
- Coeur d`Alene Mines Corporation (CDE): The company was founded in 1928 and currently manages operations in South America, Mexico, the U.S., and Australia.
- Hecla Mining Company (HL): The company has their business in a number of metals, but when it comes to silver, Helca sells unrefined bullion bars to custom smelters along with its mining operations, making this stock something of a jack of all trades.
Silver bullion is perhaps the safest and most hassle-free way to maintain silver exposure. The biggest issue when holding physical bullion comes from purchasing the metal itself, which can run up costs exponentially depending on the amount that someone wishes to purchase. Silver bullion allows an investor to know exactly where their money went, what it is worth, and have immediate access to the metal should they ever need it. Silver also runs at a much cheaper cost than gold, allowing investors of all shapes and sizes to maintain exposure to bullion [see also Dividend Special: Top Companies In Every Major Commodity Sector]:
- Coins: Coins can range anywhere from one ounce to several ounces. They are typically designed with unique logos and are the most accessible way for investors to own physical bullion.
- Bars: These are meant only for big investors in the precious metal and are the mainstays of central banks around the world. A standard silver bar weighs in at 1,000 ounces but may come in all shapes in sizes, allowing heavy hitters to purchase bars that can dwarf the standard size.
Futures were the original method for obtaining exposure to commodities. These contracts can be difficult to understand and require a rather complex futures account, so they are not meant for the average investor. For those who fully understand the nuances of these contracts, futures can be one of the most powerful trading tools for an investor, as they offer exposure that, in some cases, can be found nowhere else in the market. The following futures are offered on the COMEX via the CME Group [see also Are Gold Miners A Buy?]:
- Silver (SI): These futures are the standard method for obtaining futures exposure for silver. Contracts range anywhere from front-month to 60 months forward, allowing for speculative plays for any near-term time periods. Each contract is representative of 5,000 troy ounces and are denominated in U.S. dollars and cents. These futures are also optionable.
- E-mini Silver (XSN): These contracts, which are not optionable, trade in much lower volumes, but represent a much smaller size of just 1,000 troy ounces, making them more accessible to smaller investors.
- miNY Silver (QI): Offering a nice middle ground for investors, these futures represent 2,500 troy ounces for those that fall between the two previously mentioned options.
Mutual funds have long been one of the most popular ways to gain exposure to a number of assets. They are something of dinosaurs when it comes to investing, as a number of funds have long successful track records that other securities simply cannot compete with. The mutual fund space has tens of thousands of options and a number of those offer exposure to silver. Perhaps the biggest draw to this sector is the high dividend yields that a number of mutual funds offer. Investors should note that most of these products require minimum investments in order to discourage less-serious, and ultra-small investors [see also The Guide To The Biggest Companies In Every Major Commodity Sector]:
- Permanent Portfolio (PRPFX): Taking home the coveted five star rating from Morningstar, this fund is very popular in its category and is known for being resonably cheap for mutual fund standards. PRPFX requires a minimum investment of $1,000.
- Vanguard Precious Metals and Mining (VGPMX): This fund invests heavily into equity stakes of mining companies including industry leaders such as BHP Billiton and Goldcorp Inc. VGPMX requires a minimum investment of $3,000.
Disclosure: No positions at time of writing.