When making an investment, an individual should always be aware of the risks. Unfortunately, there is no “standard” way to do so because the level and type of risk varies by investment. When it comes to precious metals exchange-traded funds, there is money to be made, but investors should be very cautious. These ETFs are known for their tendency to be fraudulent- buyer beware.
A report released in July 2009 pointed out some irregularities in two of the largest silver ETFs in the world. Claims involved duplicate silver bar entries based on bar weight, manufacturer, and serial number information. Some duplication was even reported between various silver ETFs. Issues like this illustrate how important it is to have in-depth knowledge regarding investments.
Any investment can lose money due to poor performance but this is not the only risk. Investors should thoroughly research the company or individual holding their assets. Not all parties are scrupulous and ETFs are known to the be subject of “shady” accounting practices and even blatant fraud. There is always the potential that more ETF shares could be issued than there is actual silver or gold being held in a vault.
In many cases, an investor will not be able to discover what is included in a precious metals ETF. The fund trades on an exchange and investors believe that they are purchasing or selling at the current net asset value. However, this can be far from true because the assets underlying ETF shares can vary throughout the day.
If, after reading this, the investor still chooses to have some precious metals ETFs in the portfolio, caution should be used. The value of the ETF should be tracked against the market value of the commodity represented. If the market representing an investment contained in the ETF does not feature real-time pricing, this can be more difficult.