6 Benefits of Investing in Silver ETFs
November 4th, 2009 at 11:00am by Tom Lydon
Showing impressive gains since the recent slump, silver prices and related exchange traded funds (ETFs) may continue to rocket higher as demand from a number of different areas of the market increases.
According to market analysts, silver prices have jumped 109% from their 2008 nadir, outshining gold by 26.9% on an annual basis, as stated in CommodityOnline. Analysts are bearish for silver in the immediate short-term, but bullish for the long-term. (Why silver is outperforming).
The high gains in silver are mostly attributed to several things: strong investor demand, industrial demand and China’s appetite for the metal. (What China’s demand means).
Adding silver to an investment portfolio increases the degree of diversification and protects against fluctuations in other asset types, according to silverpa. Other beneficial factors include:
- Economics. Silver and other precious metals have a lower correlation with most common financial assets. This independent movement helps reduce overall portfolio volatility.
- U.S. dollar. Silver provides a “hedge against inflation” and history has shown that it provides a worthwhile hedge as the dollar continues to depreciate.
- Asset allocation. Experts suggest a 10% to 15% allocation of precious metals in one’s portfolio.
- Investing. Buying the physical bullion is appealing, but an investor may also consider the ease of silver ETF trading. If it’s a futures-based ETF, futures contract rolling is handled for you; if it’s physically backed, you don’t have to worry about storage.
- Low price. Silver bullion is relatively inexpensive and it is an asset that is internationally recognized. It’s not known as “the poor man’s gold” for nothing.
- Industrial demand. Industries like imaging, electronics, jewelry, coinage, superconductivity and water purification all utilize silver. Silver is a precious metal, a store of value, a piece for art and an industrial metal. (The duality of silver).
For more information on silver, visit our silver category.
- ETFS Physical Silver Shares (NYSEArca: SIVR): up 24% since inception
- iShares Silver Trust (NYSEArca: SLV): up 51.8% year-to-date
- PowerShares DB Silver (NYSEArca: DBS): up 50.8% year-to-date
For full disclosure, Tom Lydon’s clients own shares of SLV.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.