iShares Gold Trust (IAU) vs iShares Silver Trust (SLV): Which ETF Is a Better Investment?

The key differences between iShares Silver Trust (NYSEMKT:SLV) and iShares Gold Trust (NYSEMKT:IAU) are cost, recent performance, and risk profile, with SLV carrying a higher expense ratio and more volatility, while IAU is larger and more affordable.

The BlackRock-run funds are designed to track the price of a single precious metal -- silver for SLV, gold for IAU -- making them popular options for investors considering alternatives to stocks or bonds. Comparing these two exchange-traded products highlights key differences in fees, volatility, and long-term performance.

Snapshot (cost & size)

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

SLV charges a higher expense ratio, making IAU the more affordable option for cost-conscious investors. Since neither fund pays a dividend, differences in yield do not factor into the comparison.

Performance & risk comparison

What's inside

iShares Silver Trust provides direct exposure to the price of silver, tracking the metal’s spot price for nearly 20 years. All assets are allocated to the silver metal, under the commodities asset class, with no other holdings. As a result, there are no notable quirks, such as leverage or currency hedging, to note.

By contrast, iShares Gold Trust offers exposure to gold prices. This fund also falls under the commodities asset class, with 100% of its assets in physical gold bullion, with no other holdings. Like SLV, the ETF is structured as a trust rather than a traditional equity fund.

Both funds aim to mirror their respective metals’ price performance and do not introduce additional asset class tilts or complexity.

For more guidance on ETF investing, check out the full guide at this link.

Foolish take

Examining the price performance of both metals over the last five years, the prices of both silver and gold have appreciated almost in tandem, with gold slightly outperforming silver. Yet over more extended periods, such as over 15 years or more, the yellow metal's price returns have handily outperformed its poorer cousin.

Moreover, gold prices have been more stable compared to silver. This stability often means that gold is used as an inflation hedge and as a safe-haven asset during economic uncertainty.

Accordingly, the iShares Gold Trust appears to be a better choice compared to its counterpart. The above price dynamics for gold translate to a lower expense ratio for this fund versus SLV.

If you are investing for the long term, an inflation hedge and safe-haven asset should figure in your investment portfolio. Depending on your risk appetite and investment horizon, an investment in precious metals could comprise between 5% and 15% of your total portfolio value.

The primary objective is to preserve capital from inflationary pressures. Additionally, gold has performed well during stock market drawdowns, ensuring peace of mind in times of turmoil.

If you aren't in a position to invest in physical gold directly, the iShares Gold Trust ETF is an excellent option.

Glossary

Expense ratio: The annual fee, expressed as a percentage of assets, that a fund charges to cover operating costs.
Assets under management (AUM): The total market value of all assets a fund manages on behalf of investors.
Exchange-traded product (ETP): A security that tracks an index, commodity, or asset and trades on a stock exchange like a stock.
Beta: A measure of a fund’s volatility relative to the overall market, typically the S&P 500.
Drawdown: The percentage decline from a fund’s peak value to its lowest point over a specific period.
Max drawdown: The largest observed loss from a fund’s highest value to its lowest over a set timeframe.
Total return: The overall return of an investment, including price changes and any income such as dividends or interest.
Spot price: The current market price at which a commodity, such as gold or silver, can be bought or sold for immediate delivery.
Physical bullion: Actual bars or coins of precious metals held as an investment, rather than paper or digital claims.
Trust (in investing): An investment vehicle that holds assets, like precious metals, on behalf of investors, often structured differently from mutual funds or ETFs.
Currency hedging: A strategy to reduce the impact of currency exchange rate fluctuations on investment returns.

Isac Simon has no position in any of the stocks mentioned. The Motley Fool recommends BlackRock. The Motley Fool has a disclosure policy.