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iShares Silver Trust vs. Physical Silver Coins: Which Is the Smarter Way to Own the Metal?
Key Points
The iShares Silver Trust is certainly more convenient than holding physical silver coins.
Sellers of physical silver coins almost never get full market value for what they own.
Take it from someone who used to be an avid sports card collector. It can be difficult to unload collectibles for the prices we see on online sites or in stores. That also applies to jewelry and precious metals.
And that's why, for investors and maybe some collectors, too, the iShares Silver Trust (NYSEMKT: SLV) is the better way of owning that commodity than physical bars and coins. Of course, there's a trade-off with this and other silver ETFs (or gold ETFs). Investors and collectors don't get to hold anything in their hands.
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The iShares Silver Trust is more practical and potentially more profitable than owning silver coins. Image source: Getty Images.
Collectors love being able to hold their sports cards, bottles of wine, or precious metal coins in their hands. It's understandable. But that also highlights the advantages of owning gold or silver ETFs over owning the metals themselves.
Say you've got a valuable collection of silver coins. If you're storing at your home, you'll want a safe, and you'll need to tell your home or renters insurance provider about the collection. Or if you don't want to keep your silver at home, you can stash it in a safe deposit box at a bank or with a professional metals storage company. The point is that everything mentioned here costs money, and those costs nibble away at profits when a collector sells their silver coins.
Speaking of profits being eroded, sellers of silver coins will never get the full spot price when they walk into a coin store to sell. Say the seller wants to part with a silver eagle coin, and silver is at $100 an ounce in the spot market; the shop is likely to pay at most $88-$90 an ounce.
The iShares ETF, in which one share represents 0.9 ounces of silver, isn't perfect. It has an annual fee of 0.50%, or $50 on a $10,000 investment. But with this ETF, investors don't have to worry about storage or feeling fleeced if they sell silver at a local coin store.
Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.