If you want to expand your portfolio with precious metals, there are various ETFs that provide access to this asset class. But before making any decisions on your own, please consult a financial advisor to ensure your choice aligns with both your goals and risk tolerance.
Many commodity ETFs invest in physical gold and silver bullion, while others specialize in futures contracts or target the mining industry through precious metal royalty/streaming companies.
iShares Silver Trust
Like its sister ETF GLD, SLV is designed to mimic the overall price of silver. When prices increase, investors in SLV should anticipate making profits; conversely if it decreases, losses could occur from investing.
iShares Silver Trust provides an easy way for investors to directly invest in physical silver without costly or complicated arrangements for assay, transportation, warehousing and insurance that often put such investments out of reach of most investors.
However, due to market price fluctuations of SLV on a daily basis, which may cause its amount represented in each iShare to reduce over time. Furthermore, trustees will sell silver in order to pay sponsor’s fee or unexpected liabilities which reduce net asset value and amount of silver held within each share. These sales will lower both their net asset value and silver holdings represented within them.
iShares Gold Trust
ETFs (exchange-traded funds, or ETFs) typically refer to baskets of securities linked to an index, sector or commodity; but gold ETFs differ as their goal is to track one precious metal. One such ETF that does this effectively is iShares Gold Trust (IAU), providing easy exposure to this investment-grade precious metal with physical bullion that meets London Bullion Market Association or COMEX standards and listing serial numbers on their website.
Investors can purchase IAU shares directly or through brokers and use it to diversify their portfolios, yet be wary: the ETF’s direct connection to banking institutions could put your investment at risk during an economic or monetary crisis. Physical bullion holds may help mitigate some risks; however, most bullion-backed ETFs remain susceptible to counterparty risk. Physical gold on the other hand remains immune from any economic or monetary crises.
iShares MSCI Global Metals & Mining Producers ETF
This ETF provides investors with exposure to companies that mine metals from the ground. Its holdings include Gloria Material Technology Corp (TW:5009), OSAKA Titanium Technologies Co Ltd (JP:5726), Al Masane Al Kobra Mining Co (SA15HG50KL10) and Sinomine Resource Group Co Ltd (CN:CNE100001WV3); this ETF is one of the largest broad-based mining ETFs on the market and may provide long-term diversification. However, as most holdings come from developed nations; those looking for greater emerging market exposure should look elsewhere – tracking MSCI ACWI Select Metals & Mining Producers Index is another option
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Market Vectors Gold Miners ETF
Gold is an increasingly popular investment option due to its multiple uses as an inflation hedge and store of value during times of political unrest. Investors can gain exposure to this precious metal without owning physical gold by purchasing ETFs backed by it.
Some gold ETFs invest directly in precious metal, while others hold stocks of companies that produce and mine the commodity, often earning revenue through mining profits and dividends that they use to repurchase shares and expand businesses. Mining stocks may even outshone gold prices due to their ability to use production earnings and dividends for repurchasing shares and expanding businesses.
There are also leveraged gold ETFs that borrow money or use derivatives to increase market fluctuations of underlying securities, but these products can be complex and risky for novice investors as they multiply both gains and losses. Before purchasing any fund, investors should thoroughly research it by visiting its website or consulting an independent advisor who prioritizes client best interests first and foremost.
