The growth and sustainability of assets require Investment. Although the word no risk no gain is true in the case of Investment, reducing investment risk is possible, requiring diversification. The best way for diversification is to invest in financial assets and other alternative forms of Investment.
What is a Silver Investment?
Purchasing silver for capital gain and long-term value storing and saving is called silver Investment. Silver is one of the precious metal investment options, just like gold, platinum, and palladium. It is rare enough for everyone to mine and available enough to use as currency or jewelry. This characteristic made it one of the best precious metal asset classes.
Types of Silver Investment (alternatives)
There are two ways a person can invest in silver. These are,
Physical Silver Investment
It is an investment in tangible pieces of silvers that can be directly purchased from dealers and can be stored in vaults, or it also can be delivered to the purchaser. The key advantage of this type of silver investment offer is that it does not involve any counter-party. The core motivation for Investment in silver is its hedge against economic depression. Some widely used physical silver investment types are
- The government minted silver bullion coins
- Silver bullion bars
- Silver jewelry and silver grain
Paper & Silver- Backed Investment
A variety of Silver-backed assets and Digital silver investments are available that allow investors to trade silver online. The paper and electronic-based trading allow the investor to purchase silver in small pieces and hold that virtual asset in Demat Form. Silver backed investments include
- Silver ETF’s
- Silver Future Contracts
- Silver mining stocks (www.businessinsider.com)
Is Silver Investment Good or Bad?
Silver as a tangible natural resource is a good asset class to diversify an investment portfolio. Silver has intrinsic value that gives it an advantage against financial assets such as paper-based currencies. Although silver market prices face greater fluctuations due to its industrial use, it is one of the great ways to diversify an investment portfolio. (www.physicalgold.com) (money.usnews.com)
How to Invest in Silver?
Investment in silver requires an investor to have insights about a few things. These are
From Whom to Purchase?
Based on its forms, silver can be purchased from a dealer if it is in minted coin or bars form, but if it is in jewelry form, it can be purchased from available jewelry shops, and if it is stocks and ETF form, it can be purchased from online platforms such as ishares.com through a financial planner or online brokerage firms or stockbrokers.
What is the Current Market Price of Silver?
For investors to know about the current baseline market price of silver, it is suggested to look at the London Silver Fix. London Silver Fix updates the baseline price of silver twice a day, and many famous dealers and brokerage firms’ websites use the price set by London Silver Fix
What Are the Available Options of Silver Investment?
It is perhaps one of the important matters to know about the available options of investments. Precious metals are the best way to get investment protection against inflation, and investors are taking this comfort through assets class gold and silver. Six ways of investing in silver include the following (money.usnews.com)
Physical Silver Investment
Tangible chunks of silver metal are called physical silver, and it has several forms and shapes, such as coins bars, and all these shapes of solid silver pieces are called bullions which refers to the 99.99% pure silver.
1. Coins or bullion bars
Weighing based on troy ounce bullion bars is the basic biscuit-shaped silver pieces. Reputable metal dealers sell these bars. These bars of silver usually cost less than minted silver coins. Silver coins are the coins produced and minted by governments and usually cost higher as it requires a higher cost of production and design. These bullions and coins can be purchased from local dealers or online shops.
The main advantage of investing in bullion and coins is that it does not involve any other 3rd party. The buyer can get the direct possessions of the silver coins and bullions stored anywhere wished.
2. Silver Jewelry
Silver jewelry is another great way of asset allocation in concrete silver. Although it serves as ornaments for fashion and beautification, it is a great way of storing long-term asset value. Silver Jewelry can be purchased from jewelry shops and online platforms, but the problem with this investment type is the premium cost of silver jewelry as it varies depending on the brand and design.
Stocks and ETF’s
Silver stock and ETF’s are for investors who want to invest in silver but don’t want to hold it directly. For most investors, it is preferable to invest in silver as it does not include the cost associated with the concrete silver investment.
Silver Futures
Silver future is an online-based way of purchasing silver in Demat form through the future contract. It requires a large account balance to start with; with proper acquisition and knowledge, it is the fastest way of making capital gaining, but it is risky too. Only a few renowned dealers and brokerage firms offer silver futures.
ETF’s Owning Silver
Some Exchange Trade Funds possess silver, and these are a great way for investing in silver for those who do not want to buy gold bullion and want lower risk than future silver contracts. Investors get a return when silver price rises; one of the biggest companies that sell ETF’s silver is London based iShare Silver Trust (SLV)
The risk involved in it is the frequent market rate fluctuation due to industrial factors. (www.ishares.com)
Silver Mining Stocks
Another way of investing in silver is purchasing the stocks of silver mining companies and becoming a shareholder. This type of investment functions like ETF silver as it does not include direct possession of silver, but the rise in silver price results in greater profit for the company and better dividends for investors.
ETF’s that Own Silver Miners
Owning ETFs of a company that invested in silver mining companies’ stock is a great way to avoid the hassle of researching and finding out the best performing silver mining company. Investment in ETFs that holds stock of silver mining companies means indirectly investing in mining companies. A major advantage of this Investment is the reduced risk of direct Investment in a silver mining company. ETFs, invest not only in one silver mining company but also in the best performing silver mining companies combined. (www.bankrate.com) (investopedia.com/articles) (thebalance.com)
When Should you Invest in Silver?
The main reason for any investment is to store the investment value and make money from the Investment, and based on this objective; an investor should invest in silver in the following cases,
- When there is a possible breakdown in the financial market
- When the market demand of silver is not meeting the supply
- When Investment requires tangible assets as an investment portfolio
- When a silver investment company performs well
- When required, low premium cost tangible asset investment (associated cost of tangible gold investment is greater than silver Investment)
Bottom Line
Silver Investment is not for the investors who require a greater amount of cash for the daily transaction; it is for the investors who seek to preserve the Investment for the long term and want protection against fiat currencies and inflation hedge. In the case of tangible asset investment, silver investment is for those who seek a lower cost of tangible asset acquisition as the cost difference between gold and silver investment is plain.
Bibliography
- investopedia.com/articles. (n.d.). Retrieved from https://www.investopedia.com/articles/investing/032613/best-way-buy-silver.asp
- money.usnews.com. (n.d.). Retrieved from https://money.usnews.com/investing/investing-101/articles/how-to-invest-in-silver
- money.usnews.com. (n.d.). Retrieved from https://money.usnews.com/investing/investing-101/articles/how-to-invest-in-silver
- thebalance.com. (n.d.). Retrieved from https://www.thebalance.com/how-to-invest-in-silver-2466739
- www.bankrate.com. (n.d.). Retrieved from https://www.bankrate.com/investing/how-to-invest-in-silver/
- www.businessinsider.com. (n.d.). Retrieved from https://www.businessinsider.com/how-to-buy-silver
- www.ishares.com. (n.d.). Retrieved from https://www.ishares.com/us/products/239855/ishares-silver-trust-fund#howToBuyModal
- www.physicalgold.com. (n.d.). Retrieved from https://www.physicalgold.com/insights/the-different-types-of-silver-investment#Various_Silver_Investment_Types
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