By Carl Delfeld of the Chartwell ETF Advisor
Some limited portfolio exposure to silver exchange-traded funds can help reduce volatility and perhaps increase total returns over time. But keep in mind that day to day prices fluctuate sharply.
Don Dion in Seeking Alpha explains that SLV is the older of the only two U.S. ETFs that provide direct exposure to silver— that is, offering ownership of the metal rather than of stocks in mining companies or other firms that might benefit from strong silver prices. By investing in SLV, shareholders take a direct stake in 145 million ounces of silver bullion stored at a London branch of SLV’s custodian, JPMorgan Chase. I may just take a peek at the bullion next week while I am in London just to make sure that it is all there.
Silver was worth $15.82 an ounce as recently as November 7— a nice increase from last summer, when prices averaged less than $13. Prices did pull back to $14.22 early this week as risk-averse investors seemed to avoid investments that tend to be volatile. But this is exactly the opposite of what they should be doing since silver ETFs are a great diversifier for a global portfolio and may also enhance returns.
Silver is definitely not for investors looking for high returns or stability. Rather, investors seek out silver because, like other precious metals, it generates returns that are almost completely independent from the broad stock market. In fact, Dion points out that some economic events that hurt stock prices may boost silver prices — for example, quickly rising inflation may lead to a stock market sell-off even as investors scramble to buy up hard assets.
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