Now that Q4 is underway, investors are scrambling to find the right asset class for this rocky environment. Last quarter wreaked havoc on a number of investments and portfolios alike, as the global economy seems to be on a downward spiral. Given the current environment, various investors have flocked to their favorite safe havens to wait out the storm. Gold is perhaps the most popular safe haven in troubled markets, though its actual use as a metal is relatively low. As such, there has been much speculation over whether or not the metal is overvalued, scaring a number investors out of gold and into another precious metal, silver. Words: 3422
So says Jared Cummans (www.CommodityHQ.com) in an article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.
Cummans goes on to convey the following:
Silver has become an increasingly popular safe haven option as it comes with a cheaper price tag and a laundry list of practical uses in comparison to its sister precious metal. Gold’s main attraction.[however,] has been its astronomical returns over the past few years, creating handsome gains for a number of investors. Silver… has [also] had a prolific jump in prices, although its performance flew relatively under the radar of gold’s returns. While the SPDR Gold ETF (GLD) returned 23.99% and 29.27% in 2009 and 2010, the iShares Silver Trust (SLV) brought in returns of 47.29% and 82.14%, dwarfing the stellar performance from gold.
Though silver has put up some stunning numbers, the past few weeks have seen the metal sharply drop off, similar to what happened in May of this year. With the precious metal at its lowest price in months, and global volatility likely to stay, buying into silver at such low prices seems very enticing. Whether you’re looking to hop in at a low in silver, or you are just interested in diversifying your commodity holdings, we outline 25 viable options for adding exposure to silver:
Exchange Traded Funds (ETFs)
ETFs have been extremely effective for helping to spread commodities to a number of different investors. While it used to be that only futures traders were able to access the asset class, ETFs have helped the average Joe gain exposure to something like physical silver in a portfolio with just one simple fund. When it comes to silver exposure, there are ETFs for nearly every segment of the silver market, including physical bullion, futures and mining stocks:
1. Silver Trust (SLV): Without a doubt the most popular silver ETF and arguably the most popular way for investors to access this metal. SLV offers exposure to physical silver, straying away from the complexities and issues associated with silver exposure through futures or stocks. The fund has an average daily volume nearing 38 million and over $10 billion in assets. While SLV had been performing well, the silver slaughter that has taken effect recently dipped this fund into the red for 2011 returns.
2. Physical Silver Shares (SIVR): This fund also tracks physical silver bullion, making it a direct competitor to SLV. This ETF, however, undercuts its competition by 20 basis points when it comes to fees, creating an ultra-cheap option for silver exposure. Unfortunately it appears that SLV’s long track record outweighs its higher expenses, as SIVR has an ADV of 630,000 and assets of about $590 million; strong numbers on their own, but no match for what the aforementioned product brings to the table.
3. Silver Miners ETF (SIL): This product offers exposure to a number of popular silver mining, refining and exploration companies from around the world. Note that this ETF will typically represent a leveraged play on the metal, as miners typically have high betas in comparison the underlying metal.
4. UltraShort Silver (ZSL): Utilizing a futures strategy, this product seeks to return -200% of the daily performance of silver. While this fund will be subject to wild swings, its returns for September came in at approximately 37%, making for a unique opportunity if silver is slated to continue its drop.
5. Ultra Silver (AGQ): This product applies a 2X leverage to silver using forwards and futures to complete its task.
6. DB Silver Fund (DBS): For those looking for exposure to unleveraged futures, DBS is your fund. This product simply aims to follow a rules based benchmark that utilizes futures to reflect the performance of silver.
7. E-TRACS UBS Bloomberg CMCI Silver ETN (USV): This ETN invests in silver futures, but rather then offering exposure only to front-month futures, USV spreads its holdings across a number of contracts that mature anywhere from three months to five years out. Also note that because this is an ETN it will not encounter tracking error, but it will be at risk of its creditor (with its creditor being UBS, that might be of some concern to investors).
8. Pure Beta Precious Metals ETN (BLNG): This ETN uses a relatively unique methodology by investing in a basket of futures contracts on precious metals. Don’t let the name fool you, however, the product is split about 80/20 to gold and silver, with nothing left for platinum of palladium. This may be a good fund for those who are marginally interested in silver, but are more comfortable with gold.
9. Physical White Metal Basket Shares (WITE): WITE invests in all precious metals with the exception of gold. Offering physical exposure to silver (62%), platinum (28%), and palladium (10%), this may be a good product for those who like precious metals but are not necessarily married to any particular option.
10. Physical Precious Metal Basket Shares (GLTR): Similar to WITE, this fund offers physical exposure to precious metals, this time including gold. Silver takes home a 42% allocation, while the rest of the assets are spread among the remaining three precious commodities.
Stocks [and Warrants – see links below]
Investing the equity side of the equation isn’t a pure play on the metal, but it can make for a number of interesting opportunities that other investment vehicles simply don’t offer. Equities that focus on metals will most often consist of mining, exploration or refining companies which can offer a number of advantages over other options. A fair amount of these companies offer strong dividend options and high liquidity for traders of all kinds:
11. Silver Wheaton (SLW): Perhaps the most popular silver stock, SLW is the world’s largest silver streaming company. Silver streaming is the process by which one company purchases a mining firm’s silver production to refine and distribute the silver. As silver is a typical byproduct of mining, a number of companies benefit from selling the silver to other streaming firms, especially if their business model is focused on something like copper. The stock trades over 8.5 million shares daily and has a market cap of $10.4 billion. [It also has a long-term warrant “U” that does not expire until September 2013 for those interested in leveraging the amount of dollars deployed in the company and leveraging their investment return vis-a-vis the stock.]
12. Pan American Silver (PAAS): Founded in 1994, this mining company is stationed in Vancouver but runs operations all over the world. It has a healthy average volume of approximately 1.325 million and a market cap just under $3 billion. The company produces more than 24.3 million ounces of the precious metal in 2010 and hopes to meet that mark again in 2011.
13. Silvercorp Metals Inc (SVM): Though this company is based in Vancouver, it primarily focuses on operations in China, as it is the leading silver producer there. Due to its heavy ties to China, the stock should also be thought of as something of an emerging market play as policies and trends in the developing economy can have a major impact on the Silvercorp. SVM is immensely popular, with an ADV of 6.5 million and AUM of $1.39 billion. Note that the stock pays out a healthy dividend yield of 1.1%.
14. Endeavour Silver Corporation (EXK): With a market cap of just $760 million, this fund represents a small-cap play for investors searching for the high risk/return potential this stock could offer. EXK conducts its principal operations in Chile and Mexico.
15. First Majestic Silver (AG): Another small cap play, First Majestic engages in the production, exploration and acquisition of silver with a focus on Mexico. The company owns a number of other miners, one of which is home to mining areas amounting to nearly 70,000 hectares. The fund trades actively, with an ADV of 1.7 million and a market cap of $1.6 billion.
16. Great Panther Silver (GPL): The smallest stock thus far on the list, GPL takes in assets of just $336 million though it still has a nice daily volume of 1.9 million. Investors should note that the stock has a current P/E ratio of 39.84, well above the majority of miners in this category. The company focuses its operations in Mexico and also produces gold, lead and zinc.
17. Coeur d`Alene Mines Corporation (CDE): With a market cap of $1.9 billion, the stock is able to boast an ADV of 2.4 million, though similar to GPL, it has an alarmingly high P/E ratio of 81.87. The company was founded in 1928, and currently manages operations in South America, Mexico, the U.S. and Australia.
18. Hecla Mining Company (HL): This stock is fairly popular among investors as it enjoys daily volumes around 8.7 million. The company has their business in a number of metals, but when it comes to silver, Hecla sells unrefined bullion bars to custom smelters along with its mining operations, making this stock something of a jack-of-all-trades.
Silver bullion is perhaps the safest and most hassle-free way to maintain silver exposure. The biggest issue when holding physical bullion comes from purchasing the metal itself, which can run up costs exponentially depending on the amount that someone wishes to purchase. Silver bullion allows an investor to know exactly where their money went, what it is worth, and immediate access to the metal should they ever need it. Silver also runs at a much cheaper cost than gold, allowing investors of all shapes and sizes to maintain exposure to bullion:
19. Coins: Coins can range anywhere from one ounce to several ounces. They are typically designed with unique logos and are the most accessible way for investors to own physical bullion
20. Bars: These are meant only for big investors in the precious metal and are the mainstays of central banks around the world. The standard silver bars weighs in at 1,000 ounces and at a current price of around $30/oz., that would make on bar worth $30,000. Similar to coins, bars come in all shapes in sizes, allowing heavy hitters to purchase bars that can dwarf the standard size.
Futures were the original method for obtaining exposure to commodities. These contracts can be difficult to understand and require a rather complex futures account, so they are not meant for the average investor. For those who fully understand the nuances of these contracts, futures can be one of the most powerful trading tools for an investor, as they offer exposure that, in some cases, can be found nowhere else in the market. The following futures are offered on the COMEX via the CME Group:
21. Silver: These futures are the standard method for obtaining futures exposure for silver. Contracts range anywhere from front-month all the way to 2016, allowing for speculative plays for any near-term time period. Each contract is representative of 5,000 troy ounces and are denominated in U.S. dollars and cents. These futures are also optionable.
22. E-mini Silver: These contracts, which are not optionable, trade in much lower volumes, but represent a much smaller size of just 1,000 troy ounces, making them more accessible to smaller investors.
23. miNY Silver: Offering a nice middle ground for investors, these futures represent 2,500 troy ounces for those that fall between the two previously mentioned options.
Mutual funds have long been one of the most popular ways to gain exposure to a number of assets. They are something of dinosaurs when it comes to investing, as a number of funds have long successful track records that other securities simply cannot compete with. The mutual fund space has tens of thousands of options and a number of those offer exposure to silver. Perhaps the biggest draw to this sector is the high dividend yields that a number of mutual funds tend to offer. Investors should note that most of these products require minimum investments in order to discourage less-serious, and ultra-small investors:
24. Permanent Portfolio (PRPFX): Taking home the coveted five star rating from Morningstar, this fund has more than outperformed its category, and with an unheard of expense ratio of just 77 basis points; dirt cheap by mutual fund standards. The fund has total assets of $15.7 billion and pays out a dividend yield of just 0.58%.
25. Vanguard Precious Metals and Mining (VGPMX): This fund may be a great option for value investors as it pays out a dividend of 4.30%. VGPMX has a market cap of $5.2 billion and an absurdly low expense ratio of just 0.27% but requires a minimum investment of $3,000.
Beyond its role as a diversifying agent in a portfolio, perhaps the most enticing attribute that gold offers is the huge potential for priceappreciation. Although prices were stuck in somewhat of a rut in the middle part of the last decade, financial turmoil, money printing, and widespread fears over inflation have pushed gold prices sharply higher in recent years to near all time highs… Given the continuation of easy money policies by the Fed and other central banks around the world, as well as the very real possibility of more turmoil in the financial space, it isn’t surprising that many investors are looking to cash in on this modern day gold rush. For these investors looking to make a play on this elusive metal, we explore below every nook and cranny of the investing world to offer 50 ways to play gold. Words: 2768
Talk about a small world we live and invest in! The galaxy of warrants trading on the TSX/TSXV consists of only 167 planets (i.e. constituents) in total of which only 40 are stars associated with 34 commodity-related stocks that have sufficient brightness (i.e. 24+ months duration) to warrant (the pun is intended!) the attention of earthly investors. My telescope has identified each of them and below I provide you with the particulars of each so you will be in a position to do your due diligence and begin to prosper above and beyond what you could achieve investing in the commodities and/or stocks themselves. Words: 1674
With all the interest in physical gold, silver and other commodities these days, and the large/mid-cap companies who mine the metals and the juniors who are exploring for same, it begs the question: Why is no one writing about the 91% returns and the 60% leverage generated by the long-term warrants offered by a select few miners and royalty companies? The information in this article and the links to a variety of resources will change all that and make you ready and able to reap the benefits from investing in this much misunderstood asset class. Words: 2657
The most common misunderstandings regarding the primary gold ETF, SPDR Gold Trust (NYSE:GLD) is that it buys and sells gold. That is not the case. It is just a paper asset. It is not a way to buy gold and have someone else store your holdings for you. It is just an innovative way to “own gold.” [Below I outline more of just what GLD is and is not:] Words: 1470
I have always been leery of the two big exchange traded funds, SLV and GLD, because they lease the gold and silver that they sell you. I much prefer the ETFs SGOL, CEF, PSVL and PHYS which actually own the gold and silver they sell you and store it for you segregated vaults. Words: 717
Whole oceans of ink have been spilled detailing the good and not-so-good points of the closed-end fund CEF (Central Fund of Canada) and the twin ETF’s GLD (SPDR Gold Trust) and SLV (iShares Silver Trust) funds. My goal here is to distill the salient points down to the fewest words possible to help make your due diligence task somewhat less…well…tasking. [Let’s go!] Words: 650
Exchange-traded mining sector funds (ETFs) are a great way to get involved in this potentially highly profitable business. Let me tell you why, where and how to do so. Words: 795
Investing in some form of precious metals is the preferable way to protect oneself from rising inflation/decrease in the value of the U.S. dollar and here are 10 ETFs and ETNs and 5 mutual funds to do just that. Words: 879
The label “gold bug” may suggest a kooky old man who spends a lot of time in his basement reading conspiracy theory newsletters. The truth, however, is that there are many legitimate reasons to trade in gold and its derivatives. Gold has been proven time and time again to be an excellent “safe haven” investment, a holding that will appreciate in value during times of economic uncertainty. As such, gold may offer some valuable hedging and diversification benefits for a long-term portfolio. Words: 1002
While investing in gold mining companies is not quite as simple as novices to this sector might at first conclude, neither is it so overwhelmingly complicated as to make these companies inaccessible to individual, retail investors. Below are a number of things to look for when considering an investment in such companies. Words: 2745
With gold miners, in general, so attractively valued relative to the gold bullion price, the question becomes which stocks are the most compelling and have the best leverage to robust precious metals prices…In order to find the diamonds in the rough, I use what I call “The Five M’s” for mining stocks… Market cap, Management, Money, Minerals and Mine life cycle. [Let me explain each .] Words: 1146
If you’re interested in physical gold, I recommend you buy small gold bars which are available in a wide range of weights and can be bought for as little as 1 percent over the price of gold. [That being said, this article outlines five rules to follow before, during and after the purchase process.] Words: 813
Some physical gold, silver, platinum and palladium bullion assets, in addition to traditional paper assets, can be part of your Individual Retirement Account (IRA) or Roth account and they can be bought and sold with no tax consequence until you move money out of the account. [This short articles reveals just what bullion assets can, and cannot, be included.] Words: 573
I think we all would agree that owning a 10 kg bar of gold would be nice but that it is probably out of the question at the current cost of over $500,000! I had the pleasure of caressing such a bar recently and being surprised at just how heavy (22.045855 lbs.) it was for such a small object. Below I describe the gold coins of Canada and the United States. Words: 870
For a long time the buying and selling of gold has been outside the reach of the average citizen. The predominate banknote and the dominant currencies previously managed to position themselves very well in respect of the precious metal during stable periods. However, it is during difficult times [such as these when] quantitative easing and currency wars have highlighted the volatility and vulnerability of currencies…that the true, safe value of gold really stands out…Fortunately, it is now easier for you to convert your savings into gold… [than ever before and this article outlines the reason for buying physical gold and the advantages and disadvantages of buying gold bars, ingots and/or coins. Read on!] Words: 853