SLV Delivers Stronger Long Term Gains Than SGDM

Key Points

• SLV and SGDM charge identical expense ratios, but SGDM adds equity market exposure via gold miners instead of direct silver.

• SLV delivered a much stronger 1-year return, while SGDM experienced a slightly deeper drawdown over five years.

• SGDM holds a concentrated portfolio of 39 gold mining stocks; SLV tracks the price of physical silver.

iShares Silver Trust (NYSEMKT:SLV) and Sprott Gold Miners ETF (NYSEMKT:SGDM) both target precious metals, but SLV tracks physical silver prices while SGDM invests in a focused basket of gold mining stocks, each with the same expense ratio and sector exposure.

Both funds appeal to those seeking precious metals exposure, but their approaches differ: SLV offers direct access to silver price movements, while SGDM provides indirect exposure through publicly traded gold miners.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months.

SLV and SGDM charge the same annual fee, so cost alone is not a differentiator between the two. Investors may want to focus on other factors such as performance, risk, and portfolio construction when deciding between them.

Performance & risk comparison

What’s inside

SGDM holds 39 companies, all in the basic materials sector, focusing on gold miners from the U.S. and Canada. Its largest positions include Agnico Eagle Mines Ltd., Barrick Mining Corp., and Wheaton Precious Metals Corp., which together make up over a quarter of the fund. SGDM’s portfolio is more concentrated and equity-focused, with a track record of nearly 12 years.

SLV, in contrast, offers pure-play exposure to physical silver, with 100% of assets tied directly to silver prices rather than mining companies. This structure avoids company-specific risks but also lacks the potential upside (or downside) from operational leverage that miners may experience. Both funds remain firmly in the basic materials category, but their underlying exposures are quite distinct.

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What this means for investors

SLV and SGDM have little in common, other than the fact that they are both precious metal ETFs. SLV tracks the price of physical silver, which has historically been a more volatile metal than gold. SGDM is not the gold-backed version of SLV since it deals with gold miners.

The most curious part of this comparison is that, despite gold’s comparative stability, the gold mining ETF has a higher beta than the silver tracker.

Although SGDM is diversified across 39 companies, these gold miners operate in a highly leveraged industry where a downturn could potentially bankrupt some of these enterprises.

In contrast, considering that silver cannot be printed like currency, it is highly unlikely its value will fall to zero. Additionally, it has industrial uses and its ability to serve as a hedge, irrespective of the market’s performance.

Admittedly, SLV is down 35% from its 52-week high, compared with SGDM at just 19%. Still, despite that volatility, its backing by physical silver appears to make it the safer of the two investments.

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Will Healy 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.