Silver ETFs, Silver Stock, & Silver Futures

Silver Stock?

If you’ve purchased any silver at all you should immediately do the following:

  1. Reach your arm up straight over your head
  2. Turn the palm of the extended hand to the rear
  3. Bend your shoulder and arm gently, resting your hand on your upper back
  4. Pat lightly

With this purchase of silver coins or silver bullion, you have taken a major step toward a more secure future for yourself and your family.  If you’ve already made a large purchase in silver, you probably aren’t even going to bother reading this because you know all this already.  Nonetheless, you may have noticed something:  That silver is heavy and it takes up a lot of space!  Consequently, it’s not as easy to be discrete with it as say a handful of Krugerrands would be.  Don’t let this fact dissuade you from a future purchase.  You know the fundamentals, so you know you should be buying some silver, but you may be thinking is there another way to buy silver that might be more convenient?  Well, friend, there is.  In fact, there are a few ways, and we’re going to talk about them right now.  I’ll give a quick overview here and then we’ll discuss them in the next article, Physical Silver vs. Paper Silver.

SLV – the EFT Silver

Our friends on Wall Street, over the last couple of decades, have become enamored with “funds;” not the cash money type of funds – they’ve always been in love with that; what I’m talking about are “index” and “mutual funds.”  Index funds will track a particular index and an individual such as yourself can buy shares in that index.  These types of funds have taken the name ETFs, or Exchange Traded Funds.  Silver just happens to have one of these funds (actually more than one) and its ticker symbol is SLV.  Looking at a chart of SLV, we can see that it tracks the price of silver pretty much tick for tick, and it’s affordable too.  A share of SLV will cost you close to 1 oz silver physical.  There are other silver ETFs now, and even short silver ETFs where you can bet that the prices of silver will go down.  You can purchase shares of SLV and other ETFs via any broker that trades stocks.

silver stockComex and the Silver Contract

If you’ve got some bigger bucks and some bigger ballistics you can check out the COMEX and look at purchasing some silver futures contracts. Comex stands for Commodities Exchange and there you can buy “futures” on all sorts of commodities, hogs, corn, oil, and of course, silver.  A future is basically just an agreement between two parties.  In the case of silver, one party agrees to buy a certain amount of silver from the other at a set time in the future, get it?

Since this is a beginner’s article, we won’t go into too much detail.  Here’s the quick and dirty though.  When you buy a silver contract your actually agreeing to purchase 5000 ounces of silver.  You don’t have to actually come up with the $100K though.  You’ll make your purchase using margin, meaning you only have to fork over a small percentage of that large amount –  $5000 or so at today’s prices.  Remember you’re agreeing to purchase silver at a future date so if you think price is going up, you’ll agree to buy it at a higher price; the higher the price you agree to, the lower the cost of your investment.  You’re basically placing a bet, and at the other end, there’s someone betting against you, thinking the price will go down.  I won’t go too much further with this, but I will say that I’ve made and lost plenty of $$$ playing with futures.

Silver Miners

Hey, that silver’s got to come from somewhere right?  Right!  It comes from the companies who mine and refine the silver, and there are plenty of them.  Hundreds of them, and more starting up every day.  The recent downturn in the silver price has been hard on the miners and some won’t make it because their profit margins are slim.  Their profits are slim these days as well.  They have a choice whether or not to sell their metal at these low prices or to hang on to it until price increases.  As mentioned, there are many, many companies to invest in.  Maybe in a future article I’ll focus on some of them.

Hey, guess what?  There are silver miners ETFs that track the performance of groups of gold and silver miners.  The HUI, the GDX, and the NUGT are a few examples.  We’ll discuss more in the next article.  I will say that I’ve made and lost plenty of $$$ investing in mining companies.

Everything that we’ve discussed here is commonly known as silver stock or “paper silver.”  In the next article, we’ll talk about the advantages/disadvantages of paper and physical silver.

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