Why Physical Silver Investors Love ETFs – But Not Owning Them
by Jeffery Lewis
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.
The Morgan Report 2010
As we do every January, we will give an outline of several resource companies, particularly
from the silver sector. We divide these up, first looking at top-tier companies. We address
some of the companies currently in the speculative portfolio. We also look at many of
the companies we have reported on in previous reports. We go the extra mile, meaning
we actually go to each and every company and ask for their milestones for 2010. Almost
all the companies respond, but a few do not.
To the best of our knowledge we are the only report/newsletter of our type that actually
puts the respective company’s feet to the fire and asks them what their plans and
milestones are for the year ahead. This is quite an undertaking and is exhausting to say
the least. Others in our industry put out a similar report with about half as many
companies and charge for that one report, more than what we charge for basic service.
But we did not stop there this year, we also have an outlook for Rare Earths as outlined
Entering the Great Unknown: Rare Earths in 2010
By Clint Cox
2009 has been called “the Year of Rare Earths” by those in the industry. It was
tremendously exciting for the industry to be thrust into the spotlight.
I will admit that I missed the great rare earth run of 2009 in the junior exploration
companies. I tend to be very conservative in my analysis, and this often causes me to
miss opportunities in the junior mining sector. Even though I have discussed the risk of
the rare earths in The Morgan Report repeatedly, I feel the need to emphasize this
aspect once again.
First, let us begin with the current status of the rare earth elements (REEs) sector. The
mainstream media is now covering the rare earths on a regular basis—here are a couple
of the recent offerings: Members Only continue
I want to take this opportunity to thank all of our loyal subscribers for the support and
comments throughout 2009. Most of our speculative holdings are now positive again
and most of our Top Asset Companies continue to improve building shareholder value.
The website www.Silver-Investor.com will be changed to a new and easier to navigate
site in early 2010. Most of my public dialogue will be done in Blog style which frees me
up from getting up at the crack of dawn every weekday to sort through the news
personally and post the most important articles pertaining to money, metals, and mining.
With that I do wish you excellent health in the New Year, and increased wealth as well.
By Mark Brown
November 17, 2009
Well, the long-expected retest and subsequent breakout of ‘$1,000 Gold’ has finally occurred, with the rally taking the cash price of the metal to the north side of the $1,100 per ounce level in relatively short order. The big question now, of course, is this– does Gold have enough investor interest behind it to push it to the next significant price level, $1,200?
Let’s examine a long-term chart for cash Gold to see if we can find out if Gold can reach that price target before correcting again.
“Can I trust investing in silver or gold right now, either as commodities or finding “good” public companies?”
The answer is yes, always, and everywhere. (3 Ways to Grow Your Portfolio With Help From The Morgan Report)
The reason that’s the answer is because silver and gold both are sovereign wealth. They’re the only monetary or financial assets that are outside of today’s flimsy financial system.
This means that they, alone, stand for purchasing power and wealth preservation. So if you own silver, or gold, you can exchange it for something—goods or services—anywhere in the world.
As far as the other part of the question, silver equities, I would say if you’re willing to use some discipline and buy in throughout the next several months I think it’ll be a good approach. Even though we’re seeing some rallies, I do expect to see gold and silver top out here rather briefly and then probably back and fill and actually come down again. There are opportunities going forward, but that’s on the stock side. On the metal side itself, if you don’t own it you should try to get it, basically as soon as possible.
David Morgan, The Morgan Report
Everyone is talking about the change in the market, and as you have read, David Morgan is one person who puts change into action – he does exactly what he writes about in The Morgan Report.
Recently we’ve been flooded with inquiries and subscribers from all over the world who have read and even seen David personally, people like you who want to know how to make money investing in the metals markets (specifically silver and gold) and need to know who are the top companies leading the recovery.
A lot of people who were never tuned into the gold and silver story are just becoming very aware of it. Many of them who were never gold bugs are discovering gold as a place that they need to have at least part of their assets in, and that’s taking place on a global basis.
Because of that fact, the supply of gold and silver that is available for investment and purchases is diminishing rapidly. We’re going to reach a point over the next year or two where we see it’s almost impossible to find investment grade gold and silver in size.
That’s why it is important to know who to trust — from someone you can trust — like thousands of subscribers do every month with The Morgan Report.
Here’s 3 ways you can gain the edge:
1. Try the Morgan Report for just $9.99 to start: if you like it, you will get it every month, where we put everything we have into giving you insights into money, metals, and mining. David Morgan is more than a researcher, he has been fascinated by the silver markets since he was 11. His unique experience and the hands-on approach he takes to investing will help you build your portfolio based on information you can trust.
2. Just released: Upgrade to The Morgan Report Premium ($9.99 to try it out): Beyond the newsletter, you want updates and access to David’s expertise. Upgrade and you will receive private alerts & updates from David, plus two roundtable calls each month where he answers your questions; limited to 200 members only. The Morgan Report Premium will deliver updates to you via email, IM, or a desktop tool — it’s your choice, giving you a chance to submit your questions and get answers from David Morgan himself.
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You can thrive in down markets, if you know where to look and when to move. It’s what David Morgan does every day, loves to do, and why he shares his insights through the Morgan Report.