Do you want to add exposure to silver without owning a mountain of physical metal or going through the hassle of picking stocks?
Silver ETFs can allow you to participate in the price returns of silver throughout your investment accounts without having to actually buy it.
We’ll cover the best silver ETFs in Canada below and discuss them in more depth below.
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How Silver ETFs Work
Silver ETFs provide a seamless avenue for those wishing to tap into the silver market without the complications of physical ownership or storage.
At their core, these instruments mirror the behaviour of traditional stock shares. Here’s the twist: each share of a silver ETF corresponds to a certain quantity of silver, often denoted in ounces.
The majority of silver ETFs either physically hoard silver bullion within secure confines or invest in futures contracts that target future silver prices, not the current ones.
The latter seeks to capture the future trajectory of silver prices. An inevitable overhead with silver ETFs is the management fee. This fee, albeit a modest percentage, is deducted from the total assets managed and goes toward the operational and managerial expenses of the ETF.
Should you Invest in a Silver ETF?
Silver makes sense within portfolios in certain situations. Investors typically include silver in their portfolio to improve diversification or to try and hedge (or benefit from) against inflation. Since silver ETFs have unique features, they benefit some investors specifically:
- Investors bullish on the price of silver
- Individuals not looking for regular income
- Investors looking to diversify a portfolio beyond stocks and bonds
- Those looking to reduce the impact of inflation on portfolios
- Investors with a high-risk tolerance
Pros and Cons of Silver ETFs
Investing in silver through an ETF comes with its pros and cons:
Pros
- Tax benefits when investing through an account such as an RRSP or TFSA
- Much higher liquidity than buying and selling physical silver
- No storage costs
Cons
- May not always be backed by physical silver
- ETF unit values can deviate from true underlying values due to trading
- Silver ETFs may be small in size and illiquid
- Available for trading only during market hours
Best Silver ETFs in Canada
- Ticker: SVR.TO
- Inception Date: July 15, 2009
- Assets under Management: $99.82 Million
- Management Expense Ratio: 0.66%
- Investment: Silver Bullion
- Management Style: Passive
- Risk Rating: High
- Distributions: Annually
- Stock Price: $10.78
- YTD Return: -3.14%
Blackrock’s iShares offers a silver bullion ETF in Canada under the ticker SVR.TO. SVR invests directly in physical silver and aims to offer investors the performance of silver minus any fees.
SVR has a very long performance track record and is a decently sized ETF in terms of assets under management. With regards to fees, it is more than twice as expensive as Purpose’s SBT ETF for the exact same investment.
iShares rates SVR as a high-risk investment which is a fair assessment of volatility. The ETF does not offer investors any income stream since it invests purely in silver bullion.
If SBT’s small AUM eliminates it as a silver ETF option for your portfolio, SVR is the next best-priced option.
2. Purpose Silver Bullion Fund
- Ticker: SBT.TO
- Inception Date: May 10, 2016
- Assets under Management: $5.09 Million
- Management Expense Ratio: 0.61%
- Investment: Silver Bullion
- Management Style: Passive
- Risk Rating: High
- Distributions: Annually
- Stock Price: $11.74
- YTD Return: -2.7%
Purpose offers one of the lowest-cost ETFs in this space, investing directly in physical silver bullion. The fund holds silver in 1,000-ounce international bars or minor amounts of silver certificates.
SBT has a medium-length performance track record and is a tiny ETF in terms of assets. The fund is at risk of closing down in the future if it is unable to attract additional capital and should be monitored.
Since the fund invests directly in silver bullion, its performance should reflect the price change in silver minus any fees. Purpose rates SBT as a high-risk investment, which is a fair assessment of the risk for silver.
SBT does not offer investors any income stream since it invests purely in silver bullion.
As one of the most inexpensive ways to invest directly in silver, SBT is a great option to consider, especially if it attracts more capital in the future.
3. Horizons Silver ETF
- Ticker: HUZ.TO
- Inception Date: June 24, 2009
- Assets under Management: $27.56 Million
- Management Expense Ratio: 0.78%
- Investment: Silver Futures
- Management Style: Passive
- Risk Rating: High
- Distributions: Annually
- Stock Price: $10.04
- YTD Return: -3.53%
If you are looking to invest in silver through futures, Horizons offers a silver futures ETF through HUZ. HUZ is a passive fund that tracks the Solactive Silver Front Month MD Rolling Futures Index ER.
The ETF comes with a very long performance track record and is a small ETF by AUM. Despite not owning silver physically, it comes with a relatively high MER when compared to silver bullion ETFs.
HUZ could be at risk of closing down early in the future if it is unable to attract enough assets under management.
Horizons rates HUZ as a high-risk fund, which is a good assessment of risk for investors. The fund does not pay investors income as it only invests in silver futures.
If you are looking to invest in silver futures without actually trading the contracts themselves, HUZ is an excellent replacement.
4. Horizons Betapro Silver 2x Daily Bull ETF
- Ticker: HZU.TO
- Inception Date: June 29, 2009
- Assets under Management: $51.9 Million
- Management Expense Ratio: 1.39%
- Investment: Leveraged (2x) Silver Futures
- Management Style: Passive
- Risk Rating: High
- Distributions: Annually
- Stock Price: $16.81
- YTD Return: -7.71%
If your appetite for risk is very high, Horizons also offers a leveraged approach to investing in silver, again through futures. HZU will offer investors twice the daily performance of silver futures and aims to return two times the return of the Solactive Silver Front Month MD Rolling Futures Index ER.
Leveraged ETFs are designed to be mainly used as trading tools and are usually not recommended as long-term investments. They can be useful for making tactical adjustments to a portfolio.
HZU has a very long performance track record and is a decently sized silver ETF in terms of assets under management. With regards to its MER, it is many times more expensive than other silver ETF choices on our list.
Relative to non-leveraged silver ETFs, which also come with a high-risk rating, HZU should be considered a very high-risk investment.
If you are looking for tactical and leveraged exposure to silver, HZU is an excellent choice for an ETF on the shelf here in Canada.
5. Horizons Betapro Silver 2x Daily Bear ETF
- Ticker: HZD.TO
- Inception Date: June 29, 2009
- Assets under Management: $3.31 Million
- Management Expense Ratio: 1.59%
- Investment: Inverse Leveraged (2x) Silver Futures
- Management Style: Passive
- Risk Rating: High
- Distributions: Annually
- Stock Price: $16.49
- YTD Return: 7.06%
If your appetite for risk is very high and you are bearish on silver prices, Horizons has yet another solution on the ETF shelf in Canada.
HZD will offer investors twice the inverse daily performance of silver futures and aims to return two times the inverse return of the Solactive Silver Front Month MD Rolling Futures Index ER. As an example, if the index returns 3% over the course of a day, HZD should return roughly -6%.
Two-times leveraged and inverse ETFs aim to return twice the inverse performance of an investment only on a daily basis. Over a longer period of time, this can be very different from twice the inverse long-term performance of a specific asset.
HZD has a very long performance track record and is a tiny silver ETF in terms of assets under management. Investors should keep a close eye on the fund’s asset level as it could be at risk of closing down early in the near future.
With regards to its MER, it is extremely high relative to other silver ETFs on our list.
Relative to non-leveraged silver ETFs, which also come with a high-risk rating, HZU should be considered a very high-risk investment. Its inverse nature also increases the fund’s risk.
If you are looking for tactical and leveraged inverse exposure to silver, HZD may be a good short-term choice to consider.
Strategies for Including Silver ETFs in your Portfolio
A lot of investors watch the gold-to-silver ratio to try and determine the right time to invest in silver. This graphic illustrates the strategy:
Silver and other precious metals such as gold is best implemented as a small allocation of your overall portfolio. Since silver does not pay investors any income or dividends, returns are expected to come from an increase in silver price.
A typical allocation for most investors to precious metals is typically 0-10%, which includes both gold and silver. Given the volatility of these metals, especially silver, they are usually recommended for investors with a high-risk tolerance.
Investors with a lower risk tolerance should have an allocation to silver ETFs that is closer to 0%.
Investors with a higher risk tolerance may wish to aim for an allocation of 5-10% towards silver ETFs.
Are Silver ETFs a Good Investment?
Investing in silver through an ETF is a great alternative to owning the physical metal. Relative to gold, silver is worth much less per gram. This means that an equal dollar amount invested in silver (relative to gold) would mean owning a lot more of the physical metal.
Investing in a silver ETF eliminates the need to store silver, as well as the need to buy and sell through a precious metal dealer or store. Silver has a lot of industrial applications, making it less defensive than gold.
Given its many uses, silver is more closely linked to the overall economic cycle and is usually more volatile than gold. It is usually a great niche investment to own in your portfolio as a diversifier, typically in small percentages (1-5%).
Be mindful that silver does not pay you any income for holding it and actually charges ETF investors a store cost (usually embedded in the fees). In almost all cases, your returns from investing in silver will come from the metal appreciating in value.
How to Buy the Best Silver ETFs in Canada
The cheapest way to buy ETFs is from discount brokers. My top choices in Canada are:
Readers Choice
Qtrade
- 105 commission-free ETFs to buy and sell
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Wealthsimple Trade
- Stock and ETF buys and sells have $0 trading fees
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Questrade
- ETF buys have $0 trading fees
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To learn more, check out my full breakdown of thebest trading platforms in Canada.
Conclusion
The process of investing in silver becomes much simpler when using silver ETFs. Canadian silver ETFs can vary in terms of features – make sure to do your due diligence ahead of time.
Before buying a silver ETF, make sure that you are aware of the different ways in which you can add ETFs to your investment accounts.
