The Top Ten Silver Investments of 2009

It was a great year for silver investors, though not as great as many had hoped or expected. There are so many factors pointing to a much higher value for silver than was realized in 2009, but look on the bright side: so long as governments, central banks, and short-selling speculators artificially keep the price of silver down, they’re effectively subsidizing your silver purchases. The only time we should be excited about higher silver prices is when we’re ready to sell, and I, for one, am still in the accumulation stage.

That said, I can’t exactly be mad when the spot price of silver goes up. It feels good to be right, and no matter what vehicle you chose for silver investing in 2009—silver stocks, ETFs, or actual bullion—you couldn’t lose. Here is a list of the ten best silver-related investments for the year, from Christmas 2008 through Christmas 2009.

1. Silver Bullion
Although silver bullion did not see the price appreciation of the more heavily leveraged silver stocks, it was and will always be the best silver investment you can make. That’s because paper gains in the stock market can be wiped out in a flash, but so long as you hold real, physical silver, your investment is always protected. When considering the “best” investment, you have to look at risk as well as reward.

Silver hit a low in January of ’09 at $10.51 an ounce—this was the optimal time to buy. Its high point came in early December at $19.18—an 82.4% gain—but in my opinion, this was no time to sell. Personally, I think I’m being modest when I call for a per-ounce price of $50 or more within the next 2-3 years.

Now, you could have made more money buying most silver stocks in 2009, but if you’re trading stocks, the question is: what do you do with your profits? Do you roll them back into more stock investments? Do you just sit on top of the cash? Under the former, you run the risk of having things go against you and wiping out your profits. Under the latter, you’re guaranteed to lose purchasing power through the continuing devaluation of the dollar. My advice: go ahead and trade stocks if you have a knack for it, but when you take profits, buy silver bullion!

2. Hecla Mining Company (Ticker: HL)
Although Hecla ranked as the fourth worst-managed gold and silver company in an earlier article, there’s no contesting the stock’s stellar performance in 2009. Over the past fifty-two weeks, through Christmas, shares of HL are up 161.69%. If you were a really savvy trader who bought at the stock’s low ($1.17 on March 10) and sold at its high ($7.47 on December 2), you could have racked up a 538.46% gain—that could have bought a lot of silver.

As for the stock’s 2010 forecast, I don’t expect it to so greatly outperform its peers. The firm is about to post a second straight annual loss in 2009, and though it may have been drastically undervalued at $1.17, it would have to fall a lot lower than its current $6.49 before it would look like a good buy to me.

3. Endeavour Silver Corporation (Ticker: EXK)
From Christmas to Christmas, Endeavour Silver Corporation was the best-performing silver stock of all, racking up gains of 263.21%. From its low at $0.94 on New Year’s Eve of 2008, to its high of $4.16 on December 18 of ’09, Endeavour Silver skyrocketed by 342.55%.

Endeavour’s outlook for 2010 is much more promising that that of Hecla Mining, based in large part on its far superior management. In addition to its stellar stock performance, Endeavour has also grown sales by a compound rate of 45% over the past three years. That sort of thing points to sustainable growth, and thus EXK is one of my favorite silver stocks for 2010 and beyond.

4. Silver Wheaton Corporation (Ticker: SLW)
Silver Wheaton is a unique silver stock in that it doesn’t mine silver. Instead, the firm obtains it through long-term purchase contracts. This way, shares of SLW are a pretty good proxy to actual silver bullion—probably a better “pure play” on silver than a silver ETF, for example. And yet, Silver Wheaton greatly outperformed bullion in ’09, gaining 152.04% year-over-year and 257.58% from its low ($4.88 on January 15) to its high ($17.45 on December 2).

Since Silver Wheaton tries to peg itself to the spot price of silver, actual silver should be preferable to its shares in most cases. However, if you have an IRA or even a regular stock-market account with idle money in it, Silver Wheaton could be an easier way to invest those funds in silver than the generally preferable alternatives. The stock’s outlook for 2009 is just as bullish as that of silver itself.

5. Coeur d’Alene Mines Corporation (Ticker: CDE)
Coeur d’Alene Mines explores for and produces silver (and gold) in the Silver Valley mine of Idaho and the Rochester mine in Nevada, as well as two mines in Chile and Argentina. The firm is also developing mines in Bolivia and Alaska.

Year-over-year, Coeur d’Alene’s shares more than doubled, and from its low point ($5.50 on March 1) to its high ($24.86 on October 21) there’s a spread of 352%. Coeur d’Alene Mines has come off of its highs by quite a bit recently, closing on Christmas Eve at $18.58. It looks to be a solid investment for 2010.

6. Mines Management, Inc. (Ticker: MGN)
Mines Management, Inc. was rated the #1 best-managed precious-metal company, but it ranks just #6 among the best-performing silver stocks. Year-over-year, the stock is up 91.09% through Christmas, and 239.89% from its low ($1.03 on January 23) to its high ($3.47 on December 2). On Christmas Eve, it closed at $3.08 per share.

7. Buenaventura Mining Company Inc. (Ticker: BVN)
Buenaventura Mining Company, aka Compania de Minas Buenaventura (as it’s known in Peru), saw its shares range from $14 (January 15) to $42.69 (December 1)—a span of 204.93%. Year-over-year, though, shares are “only” up 82.5%.

8. Pan American Silver Corporation (Ticker: PAAS)
Pan American Silver is a mining company operating primarily in Mexico and Peru. It also sells the byproducts from its silver mining operations, including zinc, lead, copper, and gold. From its low point of $12.61 to its high of $27.31, shares of PAAS gained 116.57%.

9. Silver Standard Resources Inc. (Ticker: SSRI)
Silver Standard Resources ranks as the worst-managed silver stock on our list—or in general—but it still managed to post the ninth-best performance, year-over-year. For the fifty-two weeks ending on Christmas, shares of SSRI are up 50.8%. If you bought SSRI at the optimal time (at $11.65 on March 10) and sold it at its high ($25.60 on June 1), you would have realized a 119.74% gain in less than three months. That’s not bad, for sure, but while every other stock had its 52-week high in October or later (all but one were in December), SSRI peaked way too early.

10. MAG Silver Corporation (Ticker: MVG)
MAG Silver was ranked the sixth-worst-managed gold and silver company, and one of the reasons is that its performance lagged. Year-over-year, shares of MVG gained only 34.66%—that’s far less than silver itself. Why take the risk of buying stocks when you can hold the real stuff? Only trade in pursuit of short-term profits, which can then be converted to silver. For longer-term investing, stocks are only a good idea if there are extenuating circumstances (i.e., your employer matches contributions to your 401k). Whenever possible, though, it’s always best to hold actual silver bullion.

Tags: silver bullion, silver investing, silver investments

Junk Silver or Junk Bonds?

Junk Silver

“Junk silver” and “junk bags” are terms that refer to $1000 in U.S. coinage—dimes, quarters, or half dollars minted 1964 or earlier; commonly known junk bags consist of 90% silver. Junk bags of silver dollars are sold separately and have always held a higher premium.

We are talking about coins that are only in fair condition and have no collectible value above the bullion value or the “melt value.” The word “junk” refers only to the value of the coins as bullion, and “junk” is not scrap silver.

When these coins were freshly minted they contained 0.7234 troy ounces of silver per dollar of face value. In practice, the recognized weight of fine silver is 0.715 troy ounces per coin, or 715 troy ounces per bag—a bit less than original, due to wear. Thus the market recognized junk bags as containing 715 ounces of silver if smelted to 0.999 purity. Less common as junk silver are Kennedy half dollars from 1965 to 1970, which contained 40% silver.

In days gone by, junk bags of Canadian dimes and quarters were in the marketplace, but in today’s world very few exist. The Canadian coins contained 80% silver (0.600 troy ounces per dollar of face value) until 1966. In 1967, they were minted in both 80% and 50% varieties. In 1968, they either contained 50% silver or none at all ((such as the Cupro-Nickel). Dollars and half dollars were minted in 80% silver until 1967.

Junk silver coins are still considered legal tender and at many times have carried very low premiums. Today, however, the premium on junk bags is about 20% or more. There have been higher premiums near the peak of the silver price in 1980 and also during Y2K, when silver bags were in high demand.

For those beginning to invest in the real silver market, U.S. silver coins are easily recognized. In addition to being easy to describe to someone who has never seen a 90% silver coin in their lifetime, coins provide convenient divisibility. In other words they can be traded in small amounts, while a silver bar of perhaps 100 troy ounces cannot be divided or used for small transactions.

Simply stated, junk silver is popular among survivalists, but today it might be added among financial survivalists! In the event of a currency collapse, it is speculated by many in the precious metals community that silver coins could provide a viable alternative to today’s currency (scrip), commonly perceived to be money.

So, that is a very brief summary of “junk” silver and it must be pointed out that there is no default risk associated with owning silver. The price does vary along with all other assets, so you might risk not being able to trade your silver for the same amount of currency used for the initial purchase.

Junk Bonds

Now let’s look at “junk bonds.” A junk bond is a high yield bond that is rated below investment grade at the time of purchase. Bonds can also become “junk” if the market determines that the issuer’s risk has increased. For a quick example, at one time General Motors bonds carried a very high rating with the risk of default being extremely low, but today does anyone think that GM is capable of paying back the bondholders? These junk bonds are called “Fallen Angels.” Generally, junk bonds have a higher risk of default or other adverse credit events, but typically pay higher yields than better quality bonds.

Risks in all bond investments, including “high” quality bonds:

1. Inflation

2. Currency risk

3. Risk of Principal

4. Market Risk

5. Political Risk

6. Default Risk

7. Liquidity Risk

There are other risks but the point is made: bonds of any caliber have risk! In this day and age, nearly everyone is familiar with the fact that certain rating agencies described the risk of certain “assets” to be high grade at near zero risk. Today that is laughable but certainly no joke, as it has basically taken down the global markets to the present level, and the trust (confidence) in the system has been greatly damaged.

These days, we see many fleeing to government bonds, due to the perceived safety. However, it might be interesting to note the words of currency expert, the late Dr. Franz Pick, who said that government bonds are “certificates of guaranteed confiscation.”

We might ask if Franz Pick’s statement is true or false. Perhaps we can approach the question differently since the outstanding public debt is roughly $35,000 for everyone in the U.S. Simply ask yourself if you, your friends, and your neighbors are able to pony up the amount required on a per capita basis. If so, don’t worry be happy! But if roughly $140,000 per household is not in your petty cash drawer (or your neighbor’s) you might start to consider what really deserves to be called junk—bonds or silver.

Jimmy Rogers states, “I’m now selling long-term U.S. government bonds short. That’s the last bubble I can find in the U.S. I cannot imagine why anybody would give money to the U.S. government for 30 years for less than a 4% yield. I certainly wouldn’t. There are going to be gigantic amounts of bonds coming to the market, and inflation will be coming back.”

As the debt burden continues to increase, more and more people will see the light and realize that it is not the government responsible for paying off the bonds—it’s the people themselves. And where is that “money” coming from?

It is an honor to be,

David Morgan

Tags: 90% silver bags, bonds, government debt, inflation, junk bonds, junk silver, silver coins, silver investing

Pure Silver Coins: An Investor’s Delight

Be it a declining dollar, fears of inflation, collector’s ambition, or pure curiosity, pure silver coins offer an opportunity. To the investor it’s alternative to paper investments, and to the collector it’s ascetic and rare qualities. Either collector or investor pure silver coins are a selection for both. And, these coins are readily available from dealers, on the Internet, and at-or-in auctions.

As a pure silver coin, the coin needs to have 90-99% of silver. Indeed, many countries, such as U.S.A., United Kingdom, Mexico, China, and Australia produce an ounce of pure silver.

Examples of these silver coins are U.S. silver eagles, to the Canadian silver maple leaf, Chinese Panda, British sovereign and the variety issued by the Australian Mints.

More for the collector, but even coins featuring famous people are available from the late Princess Diana, Marylyn Monroe; even John Wane has a silver coin minted after him.

A quick search on the net will net you hundreds of varying types and styles and mintages but all with the same theme of purse silver but in different sizes from one troy ounce up to one-kilo coins.

If you do decide to seek out and buy pure silver coin sets, then be sure to buy from a reputable dealer–or the mint directly, if possible. Ensure the quality of the coin is near proof, proof or brilliant un-circulated. Also ensuring the coin is sealed in the original container and has a certificate to go with it will help maintain the value of the coin.

Indeed, it can be heaps of fun collecting a pure silver coin or set of coins or profitable for investors. Regardless of investor or collector these pure silver coins will shine into the future.

Tags: 90% silver bags, pure silver coins, silver investing

Junk Silver Ratings: The Top Five Places to Find Junk Silver

Coins may be call “junk silver,” but far from a junkie investment. Junk silver is a term thrown-on the coins by coin collectors because most of these coins won’t have a collector’s value. But junk silver has value in the eyes of silver investors. So, where do you find your next silver investment in junk silver? Here are a few ideas to start with. Rated from number one to five, we’ve listed five places to find junk silver as an investment.

1. eBay – rated number one because junk silver in thousands of varieties abound on eBay. If you’re looking for $5 dollars or $1,000 dollars of junk silver almost any amount can be found on eBay. In addition to the amount of junk silver, eBay also provides information on the credibility of each seller. As an investor buying your next asset, finding an honest seller could mean the difference between profit or loss.

If you do decide to use eBay, it’s easier to find junk silver if you search for more specific junk silver. For example searching eBay for “junk silver” will turn up fewer results than searching for terms like: pre-1964 U.S. Circulated Quarters, or Batch of Silver 1964 Nickels. Also be aware of the sellers rating, the seller’s information can be found to the right of a listing under the heading: “Meet the Seller.” These ratings will provide you with the honesty and credibility of the seller.

2. Lynn Coins – is rated right below eBay only because of the slightly less amount of options. You can find bags of junk silver from $129-$2,175. Although the options are limited, buyers won’t have to spend much time searching. Unlike eBay’s thousands of choices, at Lynn Coins there are 10 choices.

Even though the website looks a little out-of-date and somewhat unprofessional, Lynn Coins is a PayPal verified site—which means the sale has more security than third-party systems you might not know. Also, according to PayPal, Lynn Coins has been in business for seven years, and Lynn Coins has processed “3,406 buyers.”

3. C.C. Silver & Gold Inc. – this company offers a more professional approach. And for investors with a large purchase of $1,000 or more, C.C. is a better option than eBay. Unlike CMI, C.C. seems to have more coin choices as well, as of now C.C.’s website is showing options for Morgan Dollars, Peace Dollars, and 90% Silver coins with U.S. Half-dollars, Quarters, and Dimes all dated before 1964.

While browsing the selection, I noticed non-users will be confused at the process of purchasing what she is looking for. I had a hard time knowing what pull-down option to choose. So, if you don’t use the Internet well, CMI might be a better option.

4. CMI Gold & Silver – Offers junk silver bags to investors worried about professional businesses. Just take a look at the spotless design of CMI’s website. Now there’s a professional website. Anyways, a professional website does not necessarily increase the returns of an investor, and in this case CMI does offer junk silver at the same premium of silver bullion.

One of the downfalls of CMI is the lack of an on-line store. CMI wants buyers to call CMI as to “help you make the right decision for your precious metal investment.” However, professional CMI’s website, requiring investors to call CMI is rather inconvenient. For the Internet users, CMI is not for you; however, for some CMI is the place.

5. Monex Deposit Company – Along with the professional image CMI casts, Monex casts the same. Or it might be egotism, either way Monex says it “[has] led the industry in silver coin investing programs.” But that claim is hard to verify. Again, Internet shoppers will be disappointed because Monex wants you to call an account representative before you can make a purchase.

To concluded this article in rather simple terms, if you love the Internet use eBay, Lynn Coins, or C.C. Silver & Gold Inc., but if not use CMI or Monex. Likewise, if you have a limited amount of money, less than $500, use eBay, or Lynn Coins, but if you have more than $500 go to C.C. Silver & Gold Inc, CMI, or Monex.

Tags: 90% silver bags, junk silver, silver coins, silver investing

The Investor Allure of Exchange Traded Funds (ETFs)

It’s no secret: ETFs are hot. And with Wall Street pushing ETFs as the newest investment vehicle for all, it’s hard not to ignore the idea of using an ETF. It’s the low costs, liquidity, lower taxes, transparency, and specialization offered by ETFs that is making investors switch to ETFs.

Basically these ETFs are a liquid, low cost mutual fund, holding a pool of stocks within a specialized sector of the economy. For an example of such a specialized fund, think about an ETF of silver mining companies. This fund would be a holding–based on a certain percentage–of each major metal mining company. However, when compared to a classic mutual fund, the cost advantages of ETFs are huge.

Unlike ETFs, the costs run in the billions for mutual funds to hire analysis, accountants, and marketing firms. And a few of those billions could be money in your account. So, an ETF is an alluring alternative to a mutual fund. It’s the strong point of an ETF: lower fees and costs mean more money flowing to investors.

Also unlike mutual funds, ETFs can be more liquid. Many investors see mutual funds as a place to park money for a period of time, thus theses mutual funds aren’t nearly traded as ETFs. Because ETFs are bought and sold just like stocks, ETFs create trading opportunities that mutual funds just don’t offer. It’s this liquidity that draws many investors to ETFs over the traditional mutual fund.

What investor doesn’t like lower taxes? Exactly. These lower taxes provided by ETFs are also a big attraction for investors. Because ETFs don’t have trigger-happy managers running the ETF, the investor doesn’t have additional taxes to worry about. So far, taxes for ETFs are capital gains tax if you sell and some funds–but not all–have dividends.

It’s also the transparency drawing many investors into these funds because at any time you can see exactly what the fund is comprised of. The fund will usually have a set percentage in each investment. This kind of transparency is hardly found in either mutual funds or on Wall Street—that’s why investors are running to ETFs: complete transparency.

ETFs provide investors specialized segment of an industry. In this case well stick to precious metals. The iShare Silver ETF (SLV) holds a certain amount of bullion and prices closely follow the price of silver. On the other hand, streetTRACKS Gold Shares (GLD) is a fund of gold mining companies. Still, both funds are investments into the precious metals market.

On a side note, investors interested in leveraging returns will be glad to know that ETFs can be bought on margin, and options are available on ETFs. As cliché as this saying is, it is important to remember leverage is a double-edge sword: cutting out huge returns, as well as, cutting out the ignorant investors.

While ETFs are pushed by Wall Street and as other investors brag about her double digit returns, prudent investors remember: some investments–just aren’t made for everyone. So the dive into ETFs will depend on your investing personality and investment goals. So be sure to follow some sound advice: Eight Rules for Exchange Traded Funds.

Some investors will want the ease of investing in a specialized sector without having to sit down and pick the companies within that specialized sector. While other investors will want to research for hours and pick the best company within that sector, it depends on the investor weather ETFs are the right investment.

Tags: etf, silver ETF, silver investing

The Seven (Potentially) Deadly Sins of Silver Investors

The Seven Deadly Sins committed by silver investors destroy wealth, leaving investors discouraged and broke. These seven (potencially) deadly sins are: overindulgence, haste, sloth, irrational exuberance, ignorance, pride, and dogmatism. Although the seven sins are committed by beginners more often, experienced investors can commit any of theses sins as well.

1. Overindulgence – many silver investors are carried away by the hype of investing in silver. And these investors go out and buy up too much silver at one time. Remember, regardless of the market outlook, or the future of society, more than 10% of your entire investment portfolio is too much. An ideal portfolio allocation is around 7%-11%. If you are just beginning in silver: start small. Here’s another tip for beginners, it’s a good idea to start in physical silver investments such as coins, and bars, before investing in more leveraged silver investments. Get some real metal holdings to build your foundation of wealth before making other metal investments.

2. Haste – Similar to the last sin, silver investors should pace themselves when making an investment in silver. A prudent investor would spread out her investment into multiple purchases–known as dollar cost averaging. Dollar cost averaging works by averaging out the entire portfolio; for example, if the price of silver is at $13, Joe buys a little. Then next month the price fell to $12, and Joe buys a little more. Joe’s average investment is now only $12.50. Instead of if Joe bought all he could at $13, he’d be at a loss. Pace your investments to use dollar cost averaging to your advantage.

3. Sloth – With this sin, investors are lazy with proper storage. Many silver investors think the original investment is the end. However, the investor now has to properly store her investment, or risk losing. It’s your silver, so keep it that way. Keep the bulk of your investment in a safe place; this includes a personal safe, a bank safe deposit box, or a public storage facility. Whatever you use, make sure proper storage happens.

4. Irrational Exuberance – The number one rule of investing is “don’t lose money.” As such, large doses of speculation can cause an investor to lose huge sums of money. Speculation is speculation. Not investing. But depending on your goals and tolerance for risk, very moderate levels of speculation can increase the return on investments for your portfolio. If you do decide speculation is right for you, then options and futures contracts are excellent speculation tools.

5. Ignorance – You will greatly increase the rewards on your investments as you continue to study the market. Begin by reading the fundamental factors that drive silver and gold prices. Fundamentals such as supply and demand, currency moves, and the overall economy. When you are an informed investor, your investment returns increase.

6. Pride – Many silver investors could be burned because of an unreasonable level of self-respect–pride is another word for that. Just remember as much as you may be proud of your investment in silver, not everything you buy should be considered an investment. Rare coins, and silver art are not investments, as such an investor shouldn’t count these as investments. Only silver bullion, or silver coins whose value follows the spot price of silver can be counted as a silver investment. For example, a 1964 Quarter sold as junk silver is an investment, but a 1964 Quarter sold as a collectible is a collectible—not a silver investment.

7. Dogmatism – when you read online at forums or blogs about silver investments, you’ll see many people stubbornly pushing an investment as the only investment. This narrow view of the silver market can kill your investment returns. Just remember the silver ETF, junk silver, mining stocks, futures, mutual funds, index funds, options, and bullion are all ways to invest in the silver market. And, the way you invest should depend on your investing goals. What works for a different investor, may not work for you.

Tags: silver investing

Silver Mutual Funds Offer Another Option for Investors

There are numerous ways to invest in precious metals these days. Bullion and rare coins have always been investment options, and they’re still good ones. Gold and silver certificates and privately minted coins are some other choices. And there are also mutual funds that can offer you exposure to the precious-metals sector.

There are about thirty mutual funds which invest in both gold and silver. But as you will see, the investment styles and strategies of these funds vary greatly. Some invest primarily in mining stocks, while others hold bullion or coins. Still others offer a balanced approach. And finally, there are the exchange-traded index funds tied directly to the bullion price of gold and silver. One thing is for sure—it’s never been easier to invest in precious metals.

Two of the Best Precious-Metals Funds

Two of the best precious-metals mutual funds are Vanguard Precious Metals and Mining (ticker: VGPMX) and Permanent Portfolio (PRPFX). Both of these funds received five-star ratings from Morningstar, and yet they are quite different.

The Vanguard Fund is heavily stock-based mutual fund. As of July 31, 2007, 97% of its $4 billion in assets were invested in equities, with its largest holdings Lonmin (LMI), Impala Platinum (IMPUY), Anglo Platinum (AGPPY), and Aber Diamond Corporation (ABZ). All four of these stocks are foreign and can only be purchased by U.S. investors through ADRs—buying the fund is much easier.

As of July 31, 2007, Vanguard Precious Metals and Mining had a one-year annualized return of 22.29%. Its three-year return was even better, at 39.88%. And its five-year return was 34.01%. An investment of $10,000 five years ago would be worth $43,220 today.

Another amazing feature about the Vanguard Fund is its incredible Sharpe Ratio of 1.41 (five-year return over risk). In fact, based on the fund’s three-year, five-year, and ten-year data, Morningstar assigned it a return designation of “high,” and a risk designation of “low.”

Permanent Portfolio (PRPFX) didn’t fare quite as well. Its three-year, five-year, and ten-year returns are designated as “high,” but it’s risk is also “high” or “above average.” What’s more, its returns haven’t been as high as Vanguard’s—just 8.1%, 11.75%, and 13.06% for one, three, and five years, respectively.

But Permanent stands out when you look at its worst returns. In its history as a fund, the worst three-month period it has ever experienced is -5.58%. By comparison, Vanguard shareholders would have suffered a -29.8% three-month period if they held the fund long enough.

Remember, the Vanguard Fund is 97% stocks. Permanent Portfolio, by stark contrast, is much more well balanced. As of July 31, 2007, it was 23% in cash, 32% in stocks, 21% in bonds, and 24% in “other”—which, as you might guess, means mostly precious metals. In fact, its four largest holdings are U.S. Golden Eagles, Gold Canadian Maple Leafs, COMEX Gold, and COMEX Silver.

It’s easy enough to look at these two funds and say Vanguard is superior, but it really depends on what you want as an investor. Do you want a well-managed mining-company fund, or do you want a mutual fund that gives you real exposure to gold and silver? If the answer is the latter, than Permanent Portfolio is your best bet.

One Not-So-Good Fund

Of the thirty gold and silver funds, only two received a five-star rating. Three others received four stars, and all the rest but one were either given three stars or weren’t rated. There was just one two-star fund: RiverSource Precious Metals & Mining.

Like the Vanguard Fund, RiverSource is predominantly stock-based. As of July 31, it had 96% of its $120 million invested in equities, more than half of which were foreign securities. Unfortunately, its selections haven’t panned out as well as Vanguard’s, with only a 7.06% year-to-date return.

Another negative aspect of RiverSource is its ultra-high expense ratio of 2.15%. By comparison, Vanguard has an expense ratio of just 0.35% and Permanent Portfolio’s is just 1.11%. Both of the five-star funds are no-load, whereas RiverSource has a 1% back-end load. All of these fees and expenses can really take a bite out of your returns, especially when the fund’s performance isn’t all that hot to begin with!

Exchange-Traded Funds

Finally, there are exchange-traded funds (ETFs) that allow investors a more direct access-point to gold and silver. For gold, there is streetTRACKS Gold (ticker: GLD), and for silver, there is iShares Silver Trust (SLV). Both of these funds are tied directly to the price of their corresponding precious metal, and invest in nothing other than gold and silver, respectively.

For example, streetTRACKS Gold is priced so that one share of the fund is equal to 1/10 an ounce of gold. The iShares Silver Trust is priced so that one share equals ten ounces of silver. However, these ratios don’t always hold up—GLD recently traded for $66.57 a share while gold was $670 an ounce; and SLV traded at $127.65 while silver was priced at $12.79. Nevertheless, these ETFs do give investors an easy way to own gold or silver, at least on paper.

It’s As Easy as Point and Click

So what is the best way to invest in precious metals? It’s really up to you—your preferences and investment goals. The only thing you must be sure of is if your strategy matches your investment objectives. For example, if you want real exposure to gold and silver, it’s much better to purchase Permanent Portfolio than the Vanguard Fund—but even better yet to buy GLD and/or SLV.

But if maximum exposure isn’t your goal, the Vanguard Fund could be a great investment. The best news is there are dozens of options which simply didn’t exist ten or twenty years ago. Now, with nothing more than a few hundred dollars and Internet access, anyone can hedge with and profit from precious metals.

Tags: Permanent Portfolio, silver investing, silver mutual funds, Vanguard Precious Metals and Mining