Investing in gold and silver has typically been a way for investors to try to reduce their exposure and risk in the stock market. But while these metals can provide stability in times of uncertainty, they can be speculative in nature, as is evident in their volatility in recent months.
Is investing in an exchange-traded fund (ETF) such as the iShares Silver Trust (SLV 1.10%), which tracks the price of silver, a good idea for retirees and other risk-averse investors?
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Retail investors have added an element of risk to silver
Many analysts have viewed the volatility and excitement around silver over the past several months as another meme-fueled rally, not unlike what can happen to stocks. While the gains can be sudden, so too can the declines. As of Feb. 3, the iShares Silver Trust was down around 30% from its 52-week high of $109.83.
President Donald Trump's announcement of his pick for the new chair of the Federal Reserve, Kevin Warsh, led to investors selling silver, perhaps as a sign of greater confidence in the stock market and the Fed.
For risk-averse investors, this type of volatility may be untenable. With silver acting more like a meme stock than a stable investment, the iShares Silver Trust may be a less-than-ideal option to consider. It's also trading at elevated levels. Even though silver has come down sharply in price, the iShares Silver Trust remains up over 150% in the past 12 months. There could be more room for it to fall further, given its significant run-up in value.
NYSEMKT: SLV
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There are better options for retirees
In any other year, investing in silver may have been a good way for retirees to diversify their portfolios. Nowadays, however, there's arguably a bit too much volatility for risk-averse investors. Instead, a better option may be to invest in dividend-paying stocks or value stocks, which may offer more stability and predictability. If you're not comfortable picking individual stocks, there are plenty of ETFs that focus on these types of investments.
Silver may end up having a strong year in 2026, but it may also fall further in value. The uncertainty around the metal and the wild swings that investors might endure along the way are reasons why it may be better to look elsewhere if you're looking to reduce your risk in the stock market this year. The good news is that there is no shortage of potential alternatives to consider.
