Whether you buy silver, a silver ETF like the iShares Silver Trust (SLV) or silver stocks like Silver Wheaton (SLW), an investment in silver has always been considered a safe-haven investment much like gold.
Plus, one perk of silver stocks is that silver also has industrial uses unlike gold — making it a much smarter investment.
Silver stocks have been anything but robust in 2013, though. The SLV and SLW are respectively down 31% and 41% year-to-date. In comparison, the S&P 500 is up almost 24% in the same time frame.
If you’ve been invested in the silver ETF or silver stocks for all of 2013, you’ve done your investment portfolio a serious injustice.
So there are two camps at this point. Some folks have invested in silver stocks such as the SLV or SLW prior to 2013 and are taking a shellacking. Meanwhile, others see a temporary blip in silver stock prices, meaning investing in either the SLV or SLW provides incredible value.
Upside for Silver Stocks
While I’ve never owned either the SLV or SLW, I think there is appreciation potential for silver stocks at these prices. The all-time high for silver came in 1980 when the metal hit $55. The next highest point for silver came in March 2011 at $46.47 per ounce.
But for the better part of 31 years, the shiny metal traded around $5 — as seen in the chart below. Folks who bet on silver during that stretch had to wait a long time for the train to come in.
I don’t think we will have to wait long this time for the SLV or SLW stock to appreciate beyond their current prices.
If you look at a 20-year chart for silver prices you’ll notice that they’ve become far more volatile since 2003 … which is actually what you want in order to make money on silver stocks like the SLV or SLW.
SLV vs. SLW
So if you decide to bet on silver stocks, which route should you go? Well, in the past seven years, the SLV has achieved a positive total annual return in four of those years. And in each of those up years, SLW outperformed the SLV’s bundle of silver stocks by an average of 57 percentage points.
Sure, in the down years SLW has done considerably worse … but over the long-term the upside far outweighs the downside.
The bottom line: If you decide you do want to invest in silver stocks, buying the SLV is smart … but buying SLW is genius.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.