Investors looking to diversify their portfolio with precious metals should consider the iShares Silver Trust ( SLV), an ETF that tracks the value of physical silver held for the fund in a London branch of JPMorgan Chase ( JPM). While silver shouldn't amount to a large segment of an investor's portfolio, a small position in silver helps to diversify stock-heavy holdings.
The downside to SLV is the potential volatility. Silver has more industrial applications than holdings like gold and will, therefore, be more susceptible to the tide of the economy. If the industries that use silver for their products falter, shares of SLV could falter along with the price of the commodity. It is also notable that SLV does not have the same tax benefits as many ETFs since it is taxed as a collectible. Investors who are used to paying a maximum capital gains rate of 15% might be surprised to find that SLV can be taxed at a maximum rate of 28%.