jim4silver
Silver Member
- Apr 15, 2008
- 3,662
- 495
Although most here probably and hopefully get the importance of phys PMs over paper PMs, there is a way that paper PMs can be better than phys in small amounts and for specific purposes.
What I am referring to are the various ETF's associated with PMs. For those who don't know, an ETF stands for exchange traded fund which functions for the most part like a share of stock and can be bought and sold as such via your stock trading account.
I am waiting until I believe silver has finally bottomed then will put a little into an ETF called AGQ, which is a leveraged (2X) ETF which means for every 1% silver goes up in price, this ETF goes up 2%, and down the same way.
Let's say paper silver falls to $10 by late summer or fall and there is no phys available at that price because the price fell so fast and the mines won't sell at 50% or more losses, a person could get in right at that price via an ETF with the only "premiums" being your regular stock trading commissions.
Another reason I want to do this is because if/when silver finally goes up, there will be a point I will want to sell some just to get that profit (say 50% or 100%, etc) and I don't want to part with my phys silver. I don't plan on buying any more silver over $23 or so per ounce (paper price) so whatever phys I have at that price will be it. Thus I can use the ETF to buy and sell on dips and such and not touch my metals which will have to last me forever once silver breaks 30, 40, 50, etc. The leveraged part is nice to if the market is moving in your direction. You can double the rate of return over if you held that amount in phys.
Note that a downside to leveraged ETF's is something called time decay. Your "shares" can lose value over time even if the market stays flat. This is somehow due to the underlying assets of the ETF (such as futures, etc). So you don't want to hold them long term if the price is not going the right way for you. Better to get out than hold long term.
Again, there is no substitute for phys for 90% of your holdings (I just made that figure up). But the other 10% could be utilized in other ways. Also could consider an inverse ETF that goes up when silver goes down, like ZSL that could hedge your phys stash.
There are also 3X leveraged silver ETN's (exchange traded note-- don't know what that is vs. ETF but functions the same I guess), but I don't think I will use those.
Just my opinion.
Jim
What I am referring to are the various ETF's associated with PMs. For those who don't know, an ETF stands for exchange traded fund which functions for the most part like a share of stock and can be bought and sold as such via your stock trading account.
I am waiting until I believe silver has finally bottomed then will put a little into an ETF called AGQ, which is a leveraged (2X) ETF which means for every 1% silver goes up in price, this ETF goes up 2%, and down the same way.
Let's say paper silver falls to $10 by late summer or fall and there is no phys available at that price because the price fell so fast and the mines won't sell at 50% or more losses, a person could get in right at that price via an ETF with the only "premiums" being your regular stock trading commissions.
Another reason I want to do this is because if/when silver finally goes up, there will be a point I will want to sell some just to get that profit (say 50% or 100%, etc) and I don't want to part with my phys silver. I don't plan on buying any more silver over $23 or so per ounce (paper price) so whatever phys I have at that price will be it. Thus I can use the ETF to buy and sell on dips and such and not touch my metals which will have to last me forever once silver breaks 30, 40, 50, etc. The leveraged part is nice to if the market is moving in your direction. You can double the rate of return over if you held that amount in phys.
Note that a downside to leveraged ETF's is something called time decay. Your "shares" can lose value over time even if the market stays flat. This is somehow due to the underlying assets of the ETF (such as futures, etc). So you don't want to hold them long term if the price is not going the right way for you. Better to get out than hold long term.
Again, there is no substitute for phys for 90% of your holdings (I just made that figure up). But the other 10% could be utilized in other ways. Also could consider an inverse ETF that goes up when silver goes down, like ZSL that could hedge your phys stash.
There are also 3X leveraged silver ETN's (exchange traded note-- don't know what that is vs. ETF but functions the same I guess), but I don't think I will use those.
Just my opinion.
Jim
