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What is a Silver ETF?

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  • Written By: A. Leverkuhn
  • Edited By: Andrew Jones
  • Last Modified Date: 07 October 2018
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A silver ETF is a special kind of bundled security that helps investors diversify their portfolios, when their assets include commodities: in this case - the precious metal silver. In general, an Exchange Traded Fund (ETF) is a security that combines a group of commodities, currencies, or other investments, that can be traded along with individual stocks and other products on the stock market. The ETF is a brand new kind of investment, and it is revolutionizing the way that investors approach risk with almost any kind of investing strategy.

A commodity ETF takes a number of commodities futures or commodity values, and combines them into one neat package. That means that an investor can confidently buy into a certain kind of commodity without being limited to one particular company, stock, or futures agreement. Depending on its use, a commodity ETF such as a silver ETF can be a hedge against risk, a general diversification tool, or a quick-traded option for commodity speculation.

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Some beginners might best understand a silver ETF in relation to a more popular investment: gold in the form of a gold ETF, or “gold fund.” Someone might want to generally “put their money into gold,” but not be sure of what specific company or gold product they want. A gold fund or gold ETF allows them to buy into a range of gold investments all at once. To further control their speculative or long term investment, they can trade up or down on their gold or silver ETF, buying and selling amounts, during a stock market trading day in what’s called “intraday trading.” This is important, as many older kinds of investments cannot be traded this way, but must be traded on a “day” basis, at the close of a trading day.

In addition to a commodity ETF, such as a silver ETF, there are other kinds of diversified ETFs such as currency ETFs, where different currency-based securities are bundled, and even items called index ETFs. An index ETF tracks a specific index, such as the Dow Jones Industrial Average or the Standard & Poor’s 500, and allows for intraday trading based on those volatile values. The ETF really expands the repertoire of an active trader, and allows for more varied kinds of buying and selling on a daily basis. The wide range of ETFs, from commodities and currencies to indexes and bonds, means that investors can incorporate this product into a different type of holding when markets and times change.

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