How To Invest In Silver

Silver has historically been the go-to precious metal for knowledgeable investors. Although considered by most  to be more unpredictable than gold, it remains an excellent form of investment with tremendous potential. Each year, people purchase millions of 1 oz U.S. Silver Eagle and Canadian Silver Maple Leaf coins as investments. Following, you can learn more about how to invest in silver and maximize your future profits.

Why Invest in Silver?

Silver has been used as a form of currency and exchange for thousands of years.  Investing in silver is merely a means to take advantage of its potential for rewards later. Below are the reasons why buying silver remains popular with savvy investors:

  • Demand

Silver will always be an important part of the economy due to its wide range of uses and applications. It is not just for making jewelry but also has much broader medical and industrial applications, thanks to its innate properties. This precious metal may also have other properties that have remained unexplored and untested, some of which are just now beginning to surface, so there is a greater possibility that demand will continue to grow.

  • Supply

Of the leading countries that produce the most amount of silver, many are unstable politically and have sub-standard infrastructures. This affects how often and how much silver is mined, who mines it, and when it can be exported abroad. The more unstable the region, the more likely it will produce less silver and have an effect on the market. Silver mined at the surface or near the surface is also becoming scarcer, so miners have to explore new deposits at higher costs to meet demand. These factors could affect how much value will be associated with this metal.

  • Affordability

Silver is cheaper than gold and, therefore, much more attainable as a form of investment, particularly among new investors and those with a budget. With its affordability, silver is expected to increase in popularity as more investors make a shift and include it in their portfolio and as more investors become involved in the market.

  • Insurance Hedge

Historically, precious metals are considered a more stable medium of exchange than paper currency.  World events such as political destabilization and shaky economies critically impact the spending value of paper money but it will not affect precious metals anywhere near as much. Investors who capitalize on the opportunities presented by these events are generally investors in precious metals. Not only will silver help protect wealth, it can even increase overall value due to potential appreciation.

How to Invest in Silver

  • Silver Bullion

Physical silver is traded as bars or coins, usually made available in standard sizes measured in troy ounces. Investors, can buy silver bars and coins in 1, 10 and 100 troy oz. or other denominations such as 100g, 1kg, or 1000 oz.  Silver bullion is usually marked “.999 fine silver”, the stamp that identifies silver products that meet the industry standard in terms of metal content, which is 99.9% silver. These are the best physical products to buy because of the high content of silver a characteristic that identifies its relative purity.

silver IRAAnother option for investing in physical silver is buying what is known as junk silver, usually in the form of old coins that were once circulated but now have limited numismatic value. These coins include dollar coins, half-dollars, quarters and dimes made in 1964 or earlier.  Junk coins made and circulated in other countries such as Canada and the U.K. are also options, provided they were made in 1967 or earlier for Canadian coins and in 1946 or earlier for U.K. coins.  However, if the silver coin has a high numismatic value, it could fetch a higher price than one might obtain for the silver value. These coins are usually traded by private sellers and dealers.

  • Silver IRAs

Silver IRAs, or individual retirement accounts, allow individuals to invest for retirement and save on capital gains and income taxes. Storing money in the form of precious metal bullion offers a hedge against financial risks, including inflation and currency devaluation. Investing in silver IRAs will require the assistance of a trust company or custodian who specializes in precious metal investments. This third party will hold the metals under custodial agreement with the investor expected to pay fees and other charges, typically nominal amounts, to maintain the account. Once the contract is made, the physical metal changes hands and is transferred to the custodian who stores it on behalf of the client/investor.

  • ETFs

ETFs or Exchange-traded funds are popular investment vehicles for precious metals like silver. With ETFs, the investor does not actually own the metal itself but its representation as indicated on paper. When an investor buys a share he is roughly buying an ounce of silver. The physical metal is stored by a third party custodian, usually a bank. This form of investment is generally limited to larger banks who have both the experience and the stability to manage physical assets.

Note that the ratio of metal to share often decreases the longer an investor holds onto his shares. To manage the fund effectively, the custodian must sell the physical metal to compensate for associated expenses. As a result, the amount of precious metal assigned for each share decreases and the value of the ETF may lag equivalent spot pricing.

Making the Most of Your Investment

The key to investing in silver successfully is to pay attention to the spot price, particularly its history or trend. The trend of silver will give investors a fair idea about where the price will go, whether it will increase or decrease. Naturally, it is best to buy when the price is lower or if it is trending down.

Another key factor to consider is the spot price. This is the price at which 99.9% pure silver is valued per troy ounce. The spot price is quite volatile and will move several times in a trading day. The spot price is also a critical reference when buying physical silver, particularly coins which should be sold and paid for at a price that is close to the current spot price.