Looking to Invest in Gold or Silver? GLD and SLV Make It Simple to Buy Through ETFs

The iShares Silver Trust (NYSEMKT:SLV) and the SPDR Gold Shares (NYSEMKT:GLD) stand apart on underlying metal, cost, and risk -- SLV has higher recent returns and volatility, while GLD is larger and slightly cheaper to own.

Both ETFs offer investors direct exposure to precious metals, appealing to those seeking diversification or a hedge against inflation. This comparison examines their costs, risk, and performance.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500. The 1-yr return represents total return over the trailing 12 months.

GLD is slightly more affordable on fees, with a 0.40% expense ratio compared to SLV’s 0.50%. Neither fund pays a dividend, so the cost difference may matter more for long-term holders.

Performance & risk comparison

What's inside

GLD holds physical gold bullion, providing pure exposure to the price of gold and nothing else. The fund has existed for 21 years and sits entirely within the basic materials sector. It does not hold any stocks or bonds -- just gold -- so there are no top holdings to highlight, nor are there quirks such as leverage or currency hedging.

In contrast, SLV offers direct exposure to silver, reflecting the price of the metal itself. Like GLD, it does not contain stocks or other assets. Its entire portfolio is classified under real estate due to sector reporting conventions, but in reality, it tracks silver’s spot price. Both funds lack dividend distributions and are designed to closely mirror the underlying commodity price.

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

Foolish take

GLD and SLV differ from many other ETFs in that they do not contain equities. Rather than providing indirect exposure to precious metals via gold- or silver-mining companies, like some funds, these two ETFs allow for direct exposure to the metals themselves.

Investing in an ETF like GLD and SLV can be a simpler way to invest in commodities without having to physically own the metals themselves. While precious metals often underperform stocks over the long term, they can help diversify your portfolio and hedge against inflation.

Between these two ETFs, SLV has experienced more price volatility -- as seen with its higher beta and more severe max drawdown. It also has a higher expense ratio, meaning you'll pay more in fees. However, while the two ETFs have experienced similar five-year total returns, SLV has significantly outperformed GLD over the past year.

Glossary

ETF: Exchange-traded fund; a security that tracks an index, commodity, or asset and trades like a stock.
Expense ratio: The annual fee, as a percentage of assets, that a fund charges its shareholders.
Assets under management (AUM): The total market value of assets a fund manages on behalf of investors.
Beta: A measure of an investment's volatility compared to the overall market, typically the S&P 500.
Max drawdown: The largest observed loss from a fund's peak value to its lowest point over a specific period.
Commodity: A basic good, such as gold or silver, that is interchangeable with others of its kind and traded on markets.
Spot price: The current market price at which a commodity can be bought or sold for immediate delivery.
Diversification: An investment strategy that spreads assets across different types to reduce risk.
Dividend: A payment made by a company or fund to its shareholders, usually from profits.
Yield: The income return on an investment, often expressed as a percentage of the investment's cost or market value.
Drawdown: A decline in the value of an investment from its peak to its trough during a specific period.
Physical bullion: Actual precious metal bars or coins held by a fund to back its shares.

Katie Brockman 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.