Silver ETF Investing 101 (SLV)

While most investors are well aware of gold’s unprecedented march to $1,100/oz., far fewer are familiar with the yellow metal’s often overlooked cousin, silver. While gold has received a great deal of attention as a hedge against the U.S. dollar, the leading silver ETF, SLV, has outperformed its gold counterpart, GLD, by a factor of 2 to 1 in 2009.  Hello the iShares Silver Trust (ETF) (NYSE:SLV)

(eftdb.com)Although silver has flown under the radar (thanks in large part to its price of around $17/oz.), many investors consider the metal to be a sound investment due to robust industrial demand, its traditional role as a store of value, and its current ratio compared to gold. These three factors will help to ensure that despite silver’s volatility, there will always be demand for this “forgotten precious metal.”

In any case, silver ETFs are an efficient way to invest in the metal without dealing with the associated “headaches” of holding a physical amount of silver in your possession. Below is a guide to silver ETF options for investors looking for precious metal exposure that goes beyond gold.

How a Silver ETF Works
Silver ETFs can either directly hold silver bullion (the iShares Silver Trust – SLV – does this), or invest in derivatives that track the price of silver (for instance, the PowerShares DB Silver Fund – DBS -  holds futures contracts). Both types of ETFs will move with the price of silver, and similar types of silver ETFs usually have similar expense ratios.

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