A silver ETF should closely track the performance of the silver index for the physical commodity. Likewise, a silver mining ETF should track and magnify the gain and losses of silver as it rises and falls. Amid a dearth of silver ETF choices, these three funds do exactly what they should.
- iShares MSCI Global Silver Miners (NYSEMKT:SLVP)
- iShares Silver Trust (NYSEMKT:SLV)
- Global X Silver Miners ETF (NYSEMKT:SIL)
Below, I'll lay out the case for each fund.
iShares MSCI Global Silver Miners
This fund invests in companies that mine silver all over the world, holding positions in 36 different miners at the time of writing. Designed to track the MSCI ACWI Select Silver Miners Investable Market Index, it invests only in companies in the silver mining industry that are "highly sensitive to the underlying prices of silver."
It achieves that goal pretty well; chart this fund with the price of silver and you'll see a close correlation. Importantly, this fund effectively magnifies the percentage change in the price of silver, rising and falling faster than the change in the price of the metal, a key attribute of miner ETFs.
The twist with this fund is that it subjects investors to higher currency risk than others. Fewer than 19% of fund assets were invested in U.S. dollar-denominated stocks. Canadian dollar, Great British pound, and Mexican peso-denominated assets made up about 63%, 11%, and 5% of assets, respectively.
Because market capitalization is an important part of how it sizes its holdings, it has a bias toward larger silver producers. Two companies, Silver Wheaton and Fresnillo PLC, recently made up more than 26% of the fund. However, it's fairly diversified as far as silver miner ETFs go, with 36 different components. The annual expense ratio of 0.39% seems more than fair for a sector-specific ETF.
iShares Silver Trust
No need to waste words here. This ETF simply holds silver and charges an annual fee of 0.50% each year for doing it. This fund will very closely track the price of silver, minus the small fund fee, of course.
If you want a convenient way to own silver, this is your fund.
Global X Silver Miners
This fund seeks to track the performance of the Solactive Global Silver Miners Total Return Index, which invests in international companies involved in exploration, mining, and/or the refining of silver. The index will own between 20 and 40 stocks at any given time, and primarily uses market capitalization to weight the companies in the index.
Note that this fund subjects investors to less currency risk than the iShares fund. Approximately 42% of its investments were U.S. dollar denominated. Canadian dollar, Great British pound, and Mexican peso-denominated assets made up 35%, 18%, and 5% of its assets, respectively.
It's the least diversified of the funds on this list, however, holding just 23 different companies. The five largest positions made up more than half of the fund. Fewer holdings result in a significantly higher average market cap for stocks in its portfolio, with the average company being 50% larger than the constituents of the iShares MSCI Global Silver Miners. The fund is the most expensive on this list, carrying an annual expense ratio of 0.65%, but may be worth the price for reduced currency exposure.