Are Gold and Silver ETFs a Good Investment?
Gold and silver ETFs offer investors an easy, diversified investment that could act as an inflation hedge, yet should still be aware of any associated risks.
Investors who purchase these ETFs don’t need to be concerned with purity or storage issues associated with purchasing physical bullion, plus these instruments have low correlation with equities, providing extra stability in volatile markets.
They offer diversification
Gold and Silver have long been treasured assets that provide shelter during times of turmoil while at the same time acting as inflation-beating investments. Unfortunately, physically storing precious metals comes with its own risks and worries; fortunately, with Gold and Silver ETFs they offer easy management, no entry load/exit charge fees, purity guarantees, no wealth tax/STT incurrence and do not attract tax liability.
Additionally, bonds offer your portfolio the benefit of diversification. They have low correlation with stocks and can help cushion it during bearish markets when valuations become overstretched. Bonds should complement your core investment portfolio rather than replace it.
They have lower fees
Silver ETFs provide an easy, worry-free way to invest in silver without buying and storing physical metal yourself. Fund managers store this investment securely within vaults audited by SEBI, making this ETF an excellent addition to your portfolio with minimal fees attached.
Investment in gold and silver ETFs can be an excellent way to diversify your portfolio, however you should avoid leveraged gold or silver ETFs that use financial derivatives as they make bets on future price movements. Instead, seek out unleveraged ETFs which are less volatile and easier to purchase and sell.
ETFs can be purchased directly through a broker or online investment platform, and investing regularly to take advantage of dollar cost averaging can provide significant returns. Before investing, however, it is crucial that you understand both risks and rewards of any given ETF before committing your money.
They are easier to trade
ETFs offer an easier alternative to physical gold and silver ownership than the hassles associated with owning the metals directly, tracking their price without needing storage, providing transparent serial number tracking, and can even be purchased using an online trading platform or robo-advisor. Just make sure that any leveraged ETNs (aka “leveraged ETFs”) using financial derivatives or borrowing money do not multiply your losses further!
Silver ETFs that follow the spot price of silver can also be an option; however, this type of investment can be more risky. Political unrest and other external factors could have an effect on its price; also linked with banks may make them susceptible to emergency regulations or closure. Therefore, US exchange-listed silver ETFs tend to be more liquid.
They are a hedge
Gold and silver ETFs provide an efficient way to access the precious metals market, as they’re more accessible than physical bullion with lower storage costs and can serve as a hedge against stock market volatility and inflation.
However, while including precious metals is beneficial to any portfolio, they should only serve as diversifiers rather than core elements. A five to fifteen percent allocation to gold and silver could prove particularly effective for investors with smaller accounts.
Gold and silver ETFs tend to have less of an effect on economic cycles compared to physical bullion. Furthermore, they exhibit lower correlations with stocks and bonds than physical bullion does – providing investors with powerful diversification tools. The newly released iShares silver ETF provides broad exposure to the silver mining industry with shares held from over 30 companies such as Pan American Silver, Buenaventura Mining and Hecla Mining as holdings – while being 26 basis points cheaper than Global X’s silver ETF.