The iShares Silver Trust (SLV) is an ETF that replicates the price performance of silver. Precious metals and commodities in general are generally considered a great investment in times when there is a strong inflationary push or a stock market decline. Investing in silver usually involves allocating capital toward silver bars or coins, direct silver production or silver mining companies. With an ETF, on the other hand, you can invest in this commodity through exchange-traded funds, without buying it directly.
What is the iShares Silver Trust ETF?
This is a concession fund designed to provide investors with a simple, low-cost way to gain exposure to the price of silver in an investment portfolio. Managed by BlackRock, it holds silver bullion in a London vault and is designed to reflect, at any given time, the price of silver (as determined by the London Silver Fix), net of the trust’s expenses and liabilities
While the trust’s shares are not a direct substitute for physical silver, they do provide an alternative to participating in the commodities market. The trust offers a convenient way to gain exposure to silver without the need for an investor to actually hold it. In fact, acquiring and storing precious metals can be very expensive and complicated, whereas with this ETF we have a very low expense ratio: an attractive solution, if we think about how much it might cost to hold bullion in a safe.
ETF composition
When we talk about ETFs, we are buying a product that follows the performance of the underlying assets. In this case we do not have an index that contains a basket of securities, but only one element: the raw material, in this case silver, of which we follow the price variation during the stock exchange day.
Commodity ETFs are not allowed in Europe, except in Switzerland, because the regulation requires that they have a diversified composition of securities, while in the United States this product is legitimate. In the case of iShares Silver Trust, we have an ETF that is listed in dollars on the New York Stock Exchange (NYSE), whose fluctuations take place during the opening of the market
How to Invest in ETFs
If you want to invest in this asset, the best way is to register with one of the online broker platforms, because they have very low commissions and make it easier to diversify your portfolio with similar products. One of the most reliable is eToro, recognized and regulated in Italy by Consob, which provides free registration and very low management costs when they are not totally zero. The site also offers the possibility of accessing a demo account for newbies, without deposit, to start practicing with $100,000 virtual.
Other Ways to Invest in Silver
The iShares Silver Trust is not the only way to invest in commodities. In Europe, in order to trade silver, people mainly use ETCs, Exchange Trade Commodities, which are listed in euros. The main ones are: Wisdom Tree Physical Silver, characterized by the most substantial fund, followed by Xtrackers Physical Silver and Xtrackers Physical Silver EUR Hedged. The latter bears the wording “hedge” because, unlike the others, it has a currency risk hedge. In order to be able to choose the product that best suits your needs, there are comparative charts on the web that indicate yields, costs, duration, currency hedging and collateral.
Advantages and Risks of Investment: Is it worthwhile?
Commodities, and especially precious metals, are considered safe-haven assets: the most prudent investors use them mainly as a buffer when it is time to compensate for losses, in the most difficult periods of the markets. However, any investment involves risk and iShares Silver Trust is subject to price fluctuations like any other asset.
However, the silver market is growing strongly, especially since its use is fundamental to the ecological transition that is taking place around the world: in fact, it is a key component of the solar energy industry. In fact, investments in this field cover 18% of the industrial demand for silver and almost 10% of the total demand for the metal. That’s why recently its performance has in some cases even outperformed that of gold.
The iShares Silver Trust has the advantage of being one of the most liquid silver-focused funds on the market and of having a low percentage of institutional investors, which is a good thing. A substantial share of institutional ownership is often considered a strength for investors, because it goes without saying that strong interest denotes good stock quality, but the downside is that if, for some reason, one of the owners decides to sell their stock, the shares could fall significantly.