What are silver exchange–traded funds (silver ETFs)? Silver exchange-traded funds (silver ETFs) in the context of the Silver Bullion website refer to silver investment funds that trade on stock exchanges in more or less the same manner as stocks. Silver exchange-traded funds (silver ETFs) hold either physical silver (or are backed by physical silver) or paper silver, and trade close to its net asset value (NAV) for most part of the trading day. These funds are simply stated, vehicles designed to track the silver price (spot price of silver) and not for leverage such as the case is with silver derivatives.

In addition to the above, silver exchange-traded funds (silver ETFs) are quite popular among silver investors wishing to invest in paper silver, especially silver exchange-traded funds (silver ETFs) backed by physical silver. Even when backed by physical silver it is referred to as paper silver, because you at best own a paper representation of the physical silver, not physical silver itself. Yes, at least a portion of silver investors find the “…low costs, tax efficiency, and stock-like features…” (Wikipedia) of silver exchange-traded funds (silver ETFs) attractive, but like noted above, is it at best only a representation of the physical silver. It is no secret after all that for every share you buy in a silver exchange-traded fund (silver ETF) you usually get paper representation for one ounce of silver. The actual or physical silver, if it exists at all or at least in part, is stored by a custodian which is normally one of the large banks or refineries (such as Rand Refinery Limited in South Africa). Now one of the biggest problems with a silver exchange–traded fund (silver ETF), besides the problems already mentioned above, is the fact that the share-to-metal correlation erodes over time or the longer you hold your shares in a silver exchange-traded fund (silver ETF). This means the longer you hold unto the relevant shares, the less paper representation you will have of the actual or physical silver. Why is this? Well, like all businesses, silver exchange–traded funds (silver ETFs) have to sell silver or charge fees periodically in order to pay for expenses (management fees, silver storage fees, etc.).

The truth be told, some silver exchange-traded funds (silver ETFs) do allow silver investors in the relevant funds to redeem their shares for silver, physical silver that is, but it is not something they encourage and it most cases the silver investor has to redeem in whole lots of up to 50 000 shares or more at a time. Needless to say, this is out of reach for most silver investors. We can continue here and furnish you as the silver investor (or potential silver investor) with more information pertaining to silver exchange–traded funds (silver ETFs), but the long and short of it is that these funds, like silver derivatives, open the door to silver market manipulation and are not offering the same benefits as direct silver ownership.

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