Commodity based exchanged traded funds like silver ETFs are becoming extremely popular.
Why? Well, many investors have heard that in inflationary environments commodities tend to perform quite well.
In terms of gold and silver, this myth has generally been debunked. In fact, gold and silver haven't been a safe haven in inflationary environments over the long term at all.
However, when we look at rapid inflation, which is an environment that many investors think we could be heading towards due to excessive money printing, silver and gold have been known to perform quite well.
Contrary to this, companies in the technology sector (or even technology ETFs) struggle for example, due to excessive cash burn.
So in this situation, many Canadian ETF investors have been searching for the best silver ETFs in Canada to gain exposure to the precious metal. In this article, we're going to give them to you.
What types of silver ETFs are available in Canada?
Generally when you're looking at silver ETFs, or any commodity ETF for that matter, there are 3 particular types:
- Physical ETFs
- Equity ETFs
- Futures based ETFs
With physical silver ETFs, you're looking to purchase an ETF that holds the underlying commodity.
With equity silver ETFs, you're looking to gain exposure to silver miners through buying an ETF that holds their stocks.
And finally, futures based silver ETFs will use futures contracts to bet on pricing movements in the metal.
We don't speak much on futures ETFs in this article, as they are advanced investment products. However, we will provide a nice mix of physical and equity based silver ETFs that should help you make an educated decision on which one you want to buy today.
The best silver ETFs in Canada to buy now
Sprott Physical Silver Trust ETF (TSE:PSLV)
The Sprott Physical Silver Trust (TSE:PSLV) is a physical silver ETF that provides Canadians with exposure to the actual metal, and in our opinion is one of the best ways to hold silver in Canada today.
The ETF is liquid, with over 330,000 shares traded per day, and has just over $2.8 billion in assets.
One interesting concept with the Sprott silver ETF is the fact that investors have the ability to redeem their units for actual physical silver.
Now, there is some conditions that have to be met, like the fact that you must have enough units to equate to 10 1000oz silver bars, but it is a unique feature nonetheless.
Another key factor with Sprott is the fact there is no "middle man" when it comes to their silver bullion. In some situations, physical silver ETFs will store their silver at a financial institution. If that institution were to go bankrupt, the silver may be at risk.
All of Sprott's physical silver is held in custody with the Royal Canadian Mint, which is a Federal Crown Corporation of the Government of Canada.
Total fees on this silver ETF are around 0.67%, meaning you're paying $6.70 for every $1000 invested.
In terms of overall returns, the fund lacks. This was primarily due to the fact it was launched in 2010, when silver prices were extremely high due to the fallout of the financial crisis.
Since inception, the price of silver has gained 1.19% while PSLV has gained only 0.05%.
But with a silver ETF, you're buying because of future expected performance. So, I wouldn't put much emphasis on past results.
And if you look to the chart below, the fund has been able to track the price of silver quite accurately over the last 5 years, just with some discrepancies recently.
Overall, if you're looking to hold on to physical silver, this is the best silver ETF in Canada to do so.
PSLV 5 year returns vs the price of silver
Global X Silver Miners ETF (ARCA:SIL)
Unfortunately, there aren't many silver ETFs in Canada that focus on miners. So as a result, you'll have to head south of the border to gain any sort of meaningful exposure.
However, the Global X Silver Miners ETF (ARCA:SIL) is still very much a play on Canadian silver mining, as 3 of the top 4 holdings are currently Canadian miners:
- Wheaton Precious Metals (TSE:WPM)
- Pan American Silver Corp (TSE:PAAS)
- First Majestic Silver Corp (TSE:FR)
The silver ETF has over $1.22 billion in net assets at the time of writing and you'll have no difficulty in terms of liquidity, as more than 590,000 shares exchange hands every day.
The one thing you should brace yourself for with this top Canadian silver ETF however is volatility.
This ETF is prone to significant swings in price. Case in point, lets have a look at the last 8 years in terms of overall performance:
- 2020: +41%
- 2019: +34%
- 2018: -22.6%
- 2017: +1.04%
- 2016: +80.34%
- 2015: -33%
- 2014: -16.9%
- 2013: -50.31%
These wild fluctuations in price have actually left the silver miner ETF with an average annual loss of -5.36% over the last decade.
Its poor performance has been based on the poor performance of the underlying commodity however, as most miner based ETFs will succumb to.
Miners tend to outperform the underlying commodity in a bull market, and underperform the commodity in a bear market.
So, if you believe that silver will be on the rise moving forward, then this silver ETF should be able to outperform.
In terms of fees, they come in at a total of 0.65%, which means you'll pay $6.50 per $1000 to own the ETF.
SIL has actually tracked the price of silver quite closely over the last years as you can see by the chart below. This is primarily because it gives you exposure to some of the largest and most reliable silver miners in the world.
SIL 5 year returns vs the price of silver
ETFMG Prime Junior Silver Miners ETF (ARCA:SILJ)
If you want the biggest risk/reward exposure to silver via a silver ETF, then the ETFMG Prime Junior Silver Miners ETF (ARCA:SILJ) is going to be where you want to look.
Why? Well, this is a junior silver mining ETF, meaning it is made up of smaller companies focused on mining silver.
And if you're new to junior miners with silver and any commodity really, they are prone to significant swings in price.
Again, this is a US listed ETF. However, the top 10 holdings which at the time of writing account for over 66% of assets, are essentially all Canadian. In fact, 8 of the 10 top holdings in this ETF are Canadian listed stocks:
- First Majestic Silver (TSE:FR)
- Pan American Silver Corp (TSE:PAAS)
- MAG Silver Corp (TSE:MAG)
- Yamana Gold (TSE:YRI)
- SilverCrest Metals (TSE:SIL)
- Turquoise Hill Resources (TSE:TRQ)
- Silvercorp Metals (TSE:SVM)
- Endeavour Silver Corp (TSE:EXK)
With $813 million in net assets and over 1.8 million shares in total daily volume, this is the most active silver ETF on this list, and you'll have no problems buying and selling shares when you want to.
And in terms of performance, it's been the best performing silver ETF on this list over the last 1, 3 and 5 year timelines. In fact, its 5 year average annual return is 19.06%.
Make no mistake about it though, this ETF is extremely volatile. Before posting a massive 139% gain in 2016, the ETF had lost 53%, 11% and 37% in the previous 3 years.
The ETF has a beta of 1.68, suggesting that when the market moves 1%, this ETF will move 1.68%, highlighting its volatility.
Overall fees come in at 0.69%, or $6.90 per $1000 invested. So, it's the most expensive of the bunch, and this is actually a high fee for an ETF all things considered. However, as we move into more "niche" ETFs like this, we can expect to pay more.
This is by far the riskiest silver ETF on this list, and should be reserved for those with a high tolerance for risk.
Interestingly enough, the ETF has actually underperformed the price of silver itself, primarily because of the COVID-19 market crash and its effect on junior miners.
SILJ 5 year performance vs the price of silver
Overall, these top Canadian silver ETFs are perfect for exposure to the metal
If you're bullish on silver, these are going to be the silver ETFs you want to look at. In my opinion, because of the security and the way physical silver is held, Sprott's PSLV is the best way to hold actual silver through an ETF.
An alternate being the iShares Silver Trust (ARCA:SLV). However, regulatory situations with this one, like it not being registered as a commodity pool, tend to have me leaning towards Sprott's version. However, the iShares Silver Trust is definitely the most liquid physical silver ETF on the market. So, it is an option.
Just understand what you're buying, before you buy it.
We're limited here in terms of silver ETFs when it comes to producers, so the two US listed ETFs I showed you here are arguably your best exposure when it comes to miners, whether they be major producers in SIL or juniors in SILJ.
Overall, I hope you enjoyed this list of the top silver ETFs and if you find any more that are of use, feel free to contact us and we'll add them to the list.