Is Owning Precious Metals ETF’s As Good As Owning Physical?

An ETF is a strange concept, basically in lay man terms, it’s a basket of stocks that are aggregated at a smaller level allowing investors to buy shares at a fraction of what it would cost to buy a share of all the stocks that are listed (okay so not really lay man terms). But since you cannot buy fractions of shares yourself, this concept only really works if you buy with a bunch of other people, hence the “fund” aspect. However precious metal ETF’s are a little bit different, they’re ETF’s in the sense that you can buy shares online but it’s not really a basket of “silver/gold/etc.” because you can buy all of those things fractionally. Instead precious metal ETF’s, stock pile silver and gold bullion and allow the investor to buy fractional shares of this bullion.

The advantage of this approach is that people can essentially buy silver and gold without having to pay the premium. The reason for the absence of a premium is because you’re buying a share, which shouldn’t have a premium if you’re using a broker like Robinhood and the movement of the ETF’s should generally be inline with the price of silver or gold (although it’s not an exact 1 to 1 ratio). This allows people to circumvent the sometimes 1% premiums that accompany many gold and silver dealers.

Beside the advantage of essentially not having a premium gold and silver ETF’s are easy to sell and buy. In order to purchase them one only needs to set up an account and hit a button. Whereas buying physical it may take some time to really assess the quality of the metals you are buying. Also you may have to shop around to get a good price. Also buying an ETF allows a person to have exposure with out the burden of ownership. To say it a different way, it allows you to benefit from the appreciation of price with out having to figure out where to store your gold and silver, or any other precious metal.

Are there disadvantages to owning an ETF as opposed to the physical metal? Of course there are, for example if you own gold then you own gold, but you can’t exchange your investment in an ETF for the dollar value of the metal. Basically if I owned $1,000 of an ETF I couldn’t go to the bullion storage place and demand my $1,000 in silver/gold/any other precious metal. So precious metal ETF investing may be best for the person who wants to get their feet wet without having to deal with ownership of precious metals. Also it may be good for traders that want to make trades on precious metals quickly.

DISCLAIMER: I am not a financial advisory professional and this is not investment advice. All financial and investing decisions should be made with the help of an investment or financial advisory professional. Again this article/blog post is for educational purposes only and should not be considered financial or investment advice.

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