Silver ETFs: Top 3 picks for December 2022

I didn't realize how popular silver investing was until I chanced upon the r/WallStreetSilver subreddit, a forum populated by "silverbugs." Apparently, there's an entire community of investors out there who love nothing more than stacking silver coins and bars in their personal hoard.

For the rest of us, silver could still be a useful addition to a portfolio. According to "Hedging Geopolitical Risk with Precious Metals", an article by Dirk G. Baur and Lee A. Smales, in the Journal of Banking & Finance, an allocation to silver has the following benefits:

·       Silver acts as a safe haven against threats of geopolitical risk, largely due to the fact that silver mines are distributed around the world and thus not concentrated in one locale. 

·       Silver has higher investment demand for electronic and jewelry applications compared to other precious metals like palladium and platinum, second only to gold. 

Now, regular investors might baulk at the thought of storing physical silver. While this approach eliminates counterparty risk, it does incur storage and insurance costs, and creates potential security risks. A better approach might be to buy a physically-backed silver ETF. 

These ETFs can be bought and sold intra-day via most brokerages and can be held in various investment accounts such as a Roth IRA. They offer good liquidity and track the spot price of silver well. Let’s take a look at my top three picks for the rest of 2022. 

1.    iShares Silver Trust 

The iShares Silver Trust (SLV) is the largest physically backed silver ETF in the world with $10 billion in assets under management (AUM). Currently, SLV holds 14,898 tonnes of silver in trust and aims to track the spot price of silver as defined by the LBMA Silver Price. 

SLV has been around since April 2006 and remains the most popular silver ETF in terms of both AUM and volume, recording a 30-day average trading volume of 17,188,606 shares as of November 21st. It also has a well-developed options chain for traders. SLV costs an expense ratio of 0.50%. 

2.    abrdn Physical Silver Shares ETF

Buy-and-hold investors might not like SLV given its relatively high expense ratio of 0.50%. For these investors, an options chain and high daily trading volume aren't really dominant considerations given their long holding periods. For them, the abrdn Physical Silver Shares ETF (SIVR) might be better. 

SIVR holds fully allocated silver bars. This means that investors actually have beneficial ownership of a specific amount of bullion. SIVR also offers high transparency by publishing a daily list of its underlying bullion, with each bar's brand, serial number, assay, and vault location noted. Its expense ratio is 0.30%. 

3.    Sprott Physical Silver Trust

The last candidate on this list isn't actually an ETF. Rather, it’s a close-ended fund. Close-ended funds issue a fixed number of shares upon their initial public offering, which then trade in the secondary market between investors. Unlike ETFs, they don't create new units.

Thus, close-ended trusts like the Sprott Physical Silver Trust (PSLV) can potentially trade at either a premium or discount to its net asset value (NAV) based on supply and demand. Investors should check this before buying. PSLV costs an expense ratio of 0.60% and is dual-listed on Canadian exchanges.

Disclaimer: This article is limited to the dissemination of general information pertaining to investment strategies and financial planning and does not constitute an offer to issue or sell, or a solicitation of an offer to subscribe, buy, or acquire an interest in, any securities, financial instruments or other services, nor does it constitute a financial promotion, investment advice or an inducement or incitement to participate in any product, offering or investment.