If you’re considering precious metals as an investment opportunity, then silver will have come up as an option. Like gold, it’s a popular choice as an alternative to stocks and bonds, or as an addition to an existing portfolio to diversify and practice defensive investing. After all, the price of silver won’t plummet with inflation.
Silver has piqued your interest, but what next? There are several ways to invest and some factors to consider before you proceed. We’ve put together this guide for beginners to know where to start and how to proceed with their investment.
Silver and Its Uses
To understand the precious metal and its value, it’s best to know more about their uses. As well as being a precious metal, it has several unique properties that make it in demand in other areas. Unlike gold, a lot of the silver coming from mines is used for industrial purposes. In fact, more than 50% of silver, but only 10% of the gold mined, is used industrially.
Silver is a useful electrical and thermal conductor. It also has anti-bacterial properties, which is why it’s also used in medicine. Industrial demand plays a role in setting the price for silver as well as its use for coins, trade, jewelry, and showing status.
Its price can’t be compared with that of gold, but since it’s still precious and a good investment, that just makes it a more accessible alternative.
Ways To Invest
There are numerous ways to add silver to your portfolio. The method you choose will depend on your circumstances and preferences. Below, we’ve listed some of the most popular and accessible methods for beginners. We’ve also explored some of the advantages and disadvantages of each route.
The traditional way to buy silver is as coins. Silver coin ownership is popular as the coins are in your physical possession and could still have the advantage of direct use for trade or purchasing other assets.
One of the advantages of choosing silver coins is that you can store them fairly easily. A local dealership or online specialized dealer can provide you with detailed information about what you’re buying. That includes the weight, design, purity, and origin of the coins. Since silver coins have different designs and come from different periods of history, rarity plays a role in their value.
Like coins, silver bars are something that you can physically possess and store. Bars are also referred to as bullion. They’re a suitable choice for anyone who wants to buy larger quantities of silver. In that case, it’s easier to store than a large number of coins.
Bars have similar advantages to coins, as you can search dealers online and find the best price. You’ll most likely need a specialized dealer, as unlike coins, most local dealers won’t stock them. You can choose different weights and designs to suit your budget, storage capacity, and preferences.
Physical ownership isn’t the only option. Digital silver, particularly through an exchange-traded fund (ETF), is a popular option. You buy shares of an ETF, which owns the physical metal as coins, bullion, or in a raw form. It’s an indirect way of getting shares in a fund that owns silver.
Since silver’s price fluctuates more with industrial demand, ETFs provide an accessible and flexible way of investing. You can check prices and quickly buy and sell as required. It also resolves the issues of storage and security. Some digital silver sellers provide platforms for buying and selling. Plus, they cover the storage and insurance of the asset and provide guaranteed sell back.
Considerations Before You Invest
Understanding the value of silver is an essential step. There are others that you need to take before you proceed with your preferred method of investment. We’ve put together some of the key concerns that silver investors need to consider in order to make a purchase that’s best for them.
When buying silver as a physical asset, storage is a key concern. If you buy large amounts, it needs space, and somewhere that can hold the weight of the metal. You’ll want access without having it on display. Security is a crucial component of finding the best storage option.
You might consider insurance for your asset, which will dictate how you store it. Another factor is if you also invest in gold. These two precious metals can’t be stored together as it causes a reaction. It leads to damage and tarnishing of the metal, which will reduce both of their values.
Purity and Rarity
You need to find a reputable dealer to buy silver. You can find pure and sterling varieties. Sterling silver is usually 92.5% or higher in purity, whereas pure silver is 99.9% pure. It’s fine to invest in either product, but make sure the price reflects the purity and that you’re getting a genuine product.
Reputation, experience, and a responsive customer support team are good signs to look for in a reputable dealer. You might also consider buying rare silver coins. As a collector, it makes sense, but as an investor, especially a beginner, estimating its worth beyond the silver content will be trickier.
If you’re investing in silver to hold in your individual retirement account (IRA), you’ll also want to work with expert dealers. You can open a precious metal IRA, but you’ll need to understand the risks, fees, and rules.
Most importantly, you’ll need to know which products are eligible before you invest. It needs to be IRS-permitted silver coins or bullion. A silver dealer experienced in helping customers with investments can provide advice.
Take the First Step
Silver is a precious metal and its value is affected by different factors compared to gold. Now that you know more about its uses, you can understand why it’s an accessible asset to have in your portfolio.
You’re ready to take the first step and invest. You know what to consider in terms of storage, purity and financial structures. Crucially, you have a good grasp of the different ways you can invest in silver.