How to Invest in Silver
When it comes to investing, silver is one of the most popular precious metals. In some aspects, it is considered an even better investment than gold. Also, known as “miracle metal,” it is the second most useful commodity after oil. Such is the high demand for silver that over the past 30 years more silver has been used up than has been mined. So, are you interested in silver as an investment? Great, here is a list of different methods you can use to invest in silver.
Buy the Physical Metal
The most common and the easiest method to invest in silver is to buy the physical metal in form of bullion bars or coins. In fact, the method of buying the silver bullion bars is traditional and decades old. The silver bullion bars also called “good delivery” or industrial bar is 99.9% pure and can be bought or sold over the counter at major banks in some countries such as Switzerland and Liechtenstein.
Though, the bullions are available in 1000 ounce bars, 100 ounce bars, 10 ounce bars and one ounce bars, the 100 ounce bar is the most preferred size as it can be easily stored and transported. The silver bullion bars can be and should be bought from established dealers who offer refined bars produced by recognized manufacturers and refiners, thus giving protection against counterfeiting.
While, purchasing bullion bars from the dealer, the investor would have to pay assay fees that ensures the authenticity and purity of the metal. The assay checks assure safety of both parties and determines the legitimacy of the bars.
The investors can also buy silver bullion coins which are issued by government mints. These are easy to hold, store and trade, and comes with guarantee for coins metal content and purity. The one ounce silver rounds are another variation of silver coins, but are minted by organizations such as American Eagle, Canadian Maple Leaf, and Silver Vienna Philharmonic.
Buy Silver Stock
Those who don’t want to go through the hassle of buying, storing, transporting and trading bullions can opt for the silver stocks to diversify their investment portfolios. The prospective buyers can buy silver stocks from conglomerates that produce minerals such as gold and zinc along with silver. The biggest benefit of buying silver stocks in this manner is that they have a less volatile risk-return profile. However, the stock prices in this category tend to be high and aren’t parallel to prices for silver.
Another option is investing in junior exploration companies. The stocks of this type are available via pink sheets (penny stocks) or the Canadian stock exchange. The biggest downside of these stocks is that they are truly speculative and have high risk return volatility.
The investors can also opt to buy shares in the silver mining companies. Often, the share prices for mining companies are directly correlated with silver market prices. For any investment, always seek companies with strong financial statements, a strong management team, good production forecast and proven reserves. The investor should abstain from investing in company that faces political threats to production and/or risk of labor strikes.
Lastly, the investors can buy silver stocks through a broker as well. The investor can seek assistance of a full-service brokerage that offer investment advice along with stock purchase options. This option is perfect for those who have little investment experience and depend on expert advice. Such brokerages charge higher fees and are paid on commission. Those who have investment experience can chose discount brokerages which offer no advice and simply execute trades. They offer lower range of services and charge lower fees. The investors can also buy shares using their online brokerage account.
Buy Silver ETFs
The exchange traded funds is a relatively new phenomena in the investment sector. By purchasing an ETF, an investor primarily invests in raw silver. An ETF represents rights to the specific amount of silver which is measured in ounces. The ETF price paid to the company is the expenses done by them in recovering silver.
The ETFs are generally divided in to three categories – futures, physically backed ETFs and mining ETFs. Those who have just ventured into ETF sector can select for simple and cost effective physically backed ETFs which are backed by the spot price of silver, net of fees and expenses and physical silver bars. The futures ETFs offer large number of options and are backed by the future trends and performances of the white metal. The investors can also opt for the equity based Silver ETFs which tracks the index consisting of silver mining and exploration companies.
The ETFs have undergone significant increase in popularity due to the high gains that are attributed to them. Some ETFs had even performed well even when the returns on other investments were going down during the recession. Another reason in favor of going for the ETFs is that they tend to be more practical for some people instead of buying, storing and insuring a physical silvers especially considering the dealers involved.
Buy Silver Mutual funds
The investors can also go for the silver mutual funds which are considered by many a better investment than the actual metal. As most mutual funds do not hold silver as physical asset, the investors have to gain indirect access to silver in mutual funds holding equity precious metals funds, such as Vanguard Precious Metals & Mining (VGPMX) and USAA Precious Metals & Minerals (USAGX).
The major drawback of this investment mode is that the investment in silver mutual funds isn’t a sound investment if you don’t have diverse investment portfolio. The reason is that the lack of diversity in the portfolio could lead to wild and unpredictable swings.
American Century Global Gold and Oppenheimer Gold & Special Minerals B are other silver mutual funds which have become popular over the past year. Before investing in any mutual fund, it is advisable to consult an investment advisor. And, always ask for the prospectus from each mutual fund in which you are interested in. Read the prospectus carefully to get the clear understanding about the working of the mutual fund.
Leave a Reply