Second only to gold as a store of wealth and a hard currency medium of exchange, you can invest in silver either directly by purchasing silver coins or bars or indirectly by purchasing shares in silver mining companies and exchange traded funds (ETFs).
Silver ETFs give you exposure to silver prices. They typically do so by using derivatives like silver futures, holding actual stores of physical silver or by investing in the stock of silver mining companies. If you’ve ever considered investing in silver without buying physical coins or bars or shares in silver mining companies, keep reading to find out how to buy silver ETFs.
How to Buy Silver ETFs
- Compare the brokers that sell ETFs.
Because of the exchange-traded nature of ETFs, their prices offer lots of transparency. You can also buy them through all major U.S. stockbrokers and some top robo-advisors will let you do so commission-free.
In addition to the major U.S. stockbrokers we've listed, you can also trade select ETFs through commission-free brokers like Robinhood and top robo-advisors like Betterment and Wealthfront that also offer other features like tax-loss harvesting. - Open an account.
Before you can buy silver ETFs, you have to open a brokerage account, preferably with a reputable stockbroker like those listed in the previous section. You can open an account fairly easily and most brokers will now let you open an account without making an initial deposit.
If you want to buy shares in a silver ETF, you will have to deposit enough in your account to pay for those shares. You can multiply the price of the ETF shares by the number of shares you wish to purchase. You can also divide the amount you wish to invest by the price of the shares to calculate the number of shares you can afford to buy.
You can also open a margin account that will allow you to leverage the money in your account to control more shares of a silver ETF than you can buy outright. Keep in mind that leverage is a double-edged sword: You can increase your profits significantly in an upward trending market but can also lose more money if the market goes against you.
A losing position can result in a “margin call” from your broker demanding that you either deposit more funds or close out your position at a loss. A margin call occurs when the value of the positions in your account drops below the amount of money you deposited. If you do not deposit the appropriate amount of funds in the account or liquidate the position after a margin call, the position is typically automatically liquidated by the broker. - Select the type of silver ETF.
Silver ETFs can generally invest in physical silver, silver futures contracts or silver mining stocks. Below is a partial list of some of the top silver ETFs in each category traded on U.S. exchanges, including assets under management and the expense ratio for each one:
• iShares Silver Trust (NYSE: SLV): The world’s largest silver ETF, iShares Silver Trust, was launched in 2006. This U.K.- and U.S.-based ETF is backed by physical silver, so it accurately reflects the price of silver. Its vaults currently hold over 600 million ounces of physical silver and it has over $16.5 billion under management. SLV’s expense ratio, or the cost of holding SLV shares for one year, is 0.50%, or $50 annually for every $10,000 invested.
• Globex X Silver Miners ETF (NYSE: SIL): This ETF invests in silver mining stock and has investments in over 40 companies directly or indirectly involved in silver mining. SIL’s top holding is Wheaton Precious Metals (NYSE: WPM), which holds streaming agreements for 20 operating mines and 9 mining projects in the development stage. This ETF’s 3rd largest holding is in Pan American Silver (NASDAQ: PAAS), a silver miner with assets and interests in North and South America. SIL’s expense ratio is 0.66%, or $66 per year for a $10,000 investment.
• ProShares Ultra Silver ETF (NYSEARCA: AGQ): This silver ETF invests in silver futures and forward contracts, so it's structured like a commodity pool. It looks for investment results on a daily basis before fees and expenses corresponding to twice the daily performance of the Bloomberg Silver SubindexSM (BCOMSI). The silver ETF has $580 million under management and has a relatively high expense ratio of 0.93%, or $93 annually per $10,000 invested. - Pay for your ETFs.
You can now fund your account using methods acceptable to your broker so that you can enter an order to buy shares of your chosen ETFs. If you intend to trade on margin, you’ll need to deposit the minimum initial margin amount your broker requires. You’ll also need to keep “maintenance margin,” or a minimum of 25% of the total value of shares in your margin account at all times.
- Trade your ETFs (optional).
With ETF trading costs of virtually $0 in many major brokerage accounts, you can buy and sell your ETF shares with basically no overhead, so your costs will largely consist of trading losses you may incur and fees charged by the ETFs you trade.
Keep in mind that if you buy and sell the same security in a margin account on the same day, you have just made a “day trade.” Making 4 or more day trades in 5 days would make you a “pattern day trader” and subject to U.S. Securities and Exchange Commission (SEC) requirements to maintain at least $25,000 in your margin account.
If your account falls below that amount, you would get a day trading margin call to either fund your account to a minimum of $25,000 or liquidate the position that resulted in that margin call.
Pros and Cons of Silver ETFs
Trading silver ETFs has some definite advantages over trading physical silver, silver futures or silver mining stocks. These include:
Pros
- Trade shares in real-time on an exchange versus the hassles of trading physical silver.
- Low to no trading commissions on ETFs versus costs of trading silver futures and physical silver that also typically trades at a premium due to minting costs.
- Greater liquidity compared to physical silver.
Cons
- The expense ratio on some ETFs can add up if you plan on investing for the long term.
- You run counterparty risk if the fund is poorly run since bad management decisions can affect the fund’s health and erode investors’ capital.
- Lack of a physical asset in case of a severe economic or geopolitical crisis.
Tax and Commissions
Most major U.S. stock brokerage firms require commission-free trading on ETFs. If you trade silver ETFs through this type of stockbroker, you probably won’t have to pay commission on trades.
If you hold ETF shares for more than 1 year, you could be subject to the standard 20% federal tax rate. Short-term gains from holding shares in an ETF for less than a year may be taxed at the same rate as income from other sources. Consult with your accountant for tax advice specific to your situation and tax bracket.
Best Online Brokers to Buy Silver ETF
The best online ETF broker depends in large part on what you might need in a broker. Check out our picks for the best ETF brokers in the list below.
Is Buying Silver ETFs for You?
Buying a silver ETF makes a lot of sense if you’re interested in investing in silver or silver mining companies over the short, medium and long terms. Trading silver via an ETF saves you the trouble of shopping, storing and eventually selling your physical silver. Investing in mining stocks directly requires more company research and position management. You can trade silver ETFs commission-free, while trading silver futures involves commissions.
Frequently Asked Questions
Is a silver ETF a good investment?
Probably. Given silver’s prevailing upward trend and an uncertain economic future, the potential for a rise in silver prices from its current level of $25 per troy ounce remains likely, which generally boosts silver ETF prices.
Can I buy silver on the stock market?
No. You can only buy silver ETFs and silver mining stocks on U.S. stock markets.