Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
US House Prices Trend Forecast 2019 to 2021 - 20th July 19
MICROSOFT Cortana, Azure AI Platform Machine Intelligence Stock Investing Video - 20th July 19
Africa Rising – Population Explosion, Geopolitical and Economic Consquences - 20th July 19
Gold Mining Stocks Q2’19 Results Analysis - 20th July 19
This Is Your Last Chance to Dump Netflix Stock - 19th July 19
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Why Physical Silver Investors Love ETFs But Not Owning Them

Commodities / Gold and Silver 2010 Jan 21, 2010 - 02:11 PM GMT

By: Dr_Jeff_Lewis

Commodities

Despite the various reasons silver investors should not buy exchange-traded funds and instead opt for physical metals, there are also many reasons why investors should love them.


ETFs Increase Precious Awareness

Before silver and gold were spotlighted for their extreme gains, only a small percentage of investors even had proper allocations of physical metals in their portfolios.  In what was a huge oversight for the average investor, silver and gold began their run upwards in price as stocks fell. 

Several years after the rise in metals pricing jumpstarted, exchange-traded fund sponsors begin to release slews of funds that were designed to track the changes in the price of precious metals.  Today, ordinary investors can't open the Wall Street Journal or turn on the news without hearing about precious metals investing and popular ETF choices.  If you're looking into investing in silver today, you most likely first heard about them via the popular derivative products on Wall Street.

ETFs Drive up Prices

Few can deny the impact large exchange-traded funds have on the commodities markets, especially those that claim to be “physically backed” by holdings in bank vaults.  These funds have to invest every dime they receive into precious metals holdings and ultimately drive demand, as well as prices.  One otherwise unrelated ETF, the United Natural Gas Fund, at one time held as much as 60% of the front-month futures contracts for natural gas.  As you can see, these market behemoths have a dramatic impact on prices.  However, they aren't driving prices down; they're driving them up!

ETFs Open to a Trillion Dollar Market

Retirement accounts are one place you're unlikely to see a commodity investment category, and you will certainly never see one for precious metals – until now.  A variety of exchange-traded fund sponsors are lining up to encourage corporations, as well as investment companies, to list their ETFs among 401k plans and other products.  Retirement planning is a trillion dollar business which controls immense amounts of investors’ monies.  Should ETFs break into the mainstream 401k account, it’s likely that precious metals will be even more in demand and rise equally in price.

One Reason to Hate ETFs

Of course, exchange-traded funds are not all bright and shiny.  One of the many reasons investors should buy physical metals rather than paper metals is due to high annual fees that most exchange-traded funds charge.  There is simply no reason to give away some of your well earned returns just for the convenience of getting a paper statement as to how well your holdings are performing. 

For example, the iShares Silver Trust ETF (SLV) charges a whopping .5% annual fee, negating the returns you make on your silver.  If you invested $10,000 into SLV, a 10% annual return is worth $61,416 in 20 years.  On the flipside, investors who buy $10,000 in physical metals will have $67,274 in 20 years, which is a difference of $5,850.  Why give away those extra thousands of dollars, not to mention endure the risk of “paper” metals?   

While we can love exchange-traded funds for bringing thousands of investors into the world of precious metals ownership, as investors, it makes little sense to own them ourselves, especially at a cost of $5,850 on a relatively small $10,000 investment.

By Dr. Jeff Lewis

Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com and Hard-Money-Newsletter-Review.com

Copyright © 2010 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules