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Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some precious metals miners to your portfolio, the Global X Silver Miners ETF (NYSEMKT: SIL ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. The Global X ETF's expense ratio -- its annual fee -- is 0.65 %. The fund is on the small side, too, so if you're thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This ETF is too young to have a sufficient track record to assess. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
Why silver and gold?
Gold and silver are not for everyone, but some investors like to include some in their portfolios for diversification's sake. Precious metals such as silver have more utility, being more widely used in industry.
The performances of gold- and silver-related companies over the past year were mixed. Hecla Mining (NYSE: HL ) lost only 1%. The company has suffered in the recent past, as its Lucky Mine was shut down last year while safety improvements were made. It's gearing up for a big production boost, though, and sports a solid balance sheet. It also pays a dividend, tied to silver prices.
Silver Wheaton (NYSE: SLW ) shed 4%. It's a strong performer with a profitable business model, financing other miners in exchange for a cut of their business. It's poised to profit from a rise in silver prices, but some would like to see more of a dividend payout. In the meantime, it has been making some lucrative deals. Some see it as an attractive hedge against economic or political fallouts from Washington's wranglings.
Coeur d'Alene Mines (NYSE: CDE ) shrank 25%, mining both silver and gold. The company didn't thrill investors recently, receiving a downgrade and also taking on $200 million more of debt – it also got a big haircut after posting disappointing third-quarter numbers. Some are waiting for it to start paying a dividend.
Silvercorp Metals (NYSE: SVM ) sunk 47%. It's been a low-cost producer of silver, with substantial operations in China. It pays a 2.4% dividend as well. Some questions have been raised about its stated silver production levels, and some shareholder lawsuits have followed -- adding some uncertainty to the company. Silvercorp management has stated that the allegations are false and it changed auditors late last year.
The big picture
Demand for precious metals isn't going away anytime soon. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.
If you are looking for a company whose success is determined by the metals market, but without involving itself in the risks of physically mining the metals, then Silver Wheaton provides a unique play on the future of silver. SLW chooses to finance the mining of silver, has grown sales and net income every year since 2008, and has increased competitive advantages over its limited peer group. More details about our outlook for Silver Wheaton can be found here in our Motley Fool analyst report.