How To Invest In Silver

Dear Rich Lifer,

Last month we wrote about the opportunities that exist in investing in gold.

During times of economic downturn, or when downturns are expected, many investors turn to precious metals.

These assets are appealing because they are designed to protect against inflation and ambiguity in the markets.

We determined that gold has become a portfolio staple, but today we want to talk about another precious metal you shouldn’t miss out on: silver.

Silver prices were mostly flat this year but have been peaking in recent months.

Adrian Day, chairman and CEO of Adrian Day Asset Management, notes that silver-backed exchange-traded funds are seeing both increased volume and assets under management.

In fact, many market watchers see a positive environment for silver as the Federal Reserve cuts U.S. interest rates as a hedge against inflation.

If you think of silver as being “poor man’s gold,” it’s time to think again.

Silver is about 1.5 times more volatile than gold, says Frank Holmes, CEO and chief investment officer of U.S. Global Investors, because of its lower price and the fact that it can act as both an investment and an industrial metal.

So today, we will delve into what you need to know about investing in silver.

What Does Investing in Silver Mean?

Investing in silver means putting your money into the production, trading, or outright ownership of the silver metal.

While silver is technically just another commodity, it is somewhat different as an asset class because silver can’t be grown, reproduced, or created. In fact, while silver has many industrial purposes, the biggest gains and losses come not from the supply and demand of the metal but from the investing arena. Like gold, the price of silver is driven by market demand.

Silver’s inherent value and history of being used as a currency mean that even if the dollar’s value drops, investors who hold silver will come out on top. Much of the appeal of precious metals comes from the fact that they give investors something to latch on to. They’re not just
numbers on a screen.

Many investors also believe that precious metals, in general, are a hedge against stock market collapse and other major financial events.

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Buying Silver Coins and Bars

If you are looking to buy physical silver, the first place to start is researching prices and dealers.

To find baseline silver prices, Peter Thomas, senior vice president of Zaner Precious Metals, says investors should look at the London Silver Fix. This price is updated twice daily and is displayed on most precious metals dealers’ websites.

When researching prices, you should always check out a few dealers to get a sense of the current prices; most dealers should be competitive when looking to sell silver.

There are many reliable dealers online that you can purchase the silver from; just make sure the dealer is a member of metals industry groups like the Industry Council for Tangible Assets or Professional Numismatists Guild.

When it comes to pricing, bullion bars have the least amount of dealer premium, because these products are simply silver poured into a mold.

Bullion coins have a higher premium over bars because of the labor that goes into making blanks, stamping them, inspecting and sealing them in a case. The most popular bullion coins with the most consistent premiums are the 1-ounce Silver American Eagle from the U.S. Mint and the 1-ounce Canadian Maple Leaf from the Royal Canadian Mint.

Physical bullion can be stored in a home safe, but for quantities of more than 1,000 ounces, investors should consider depository storage.

Silver can also be included in individual retirement accounts (IRAs) however, the Internal Revenue Service (IRS) has strict requirements on how these assets are stored and the type of coins that are permitted.

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EFTs and Stocks

If owning physical silver is not in the cards for you right now, not to fear, you have other investing options.

One great way to invest in silver is through exchange trade funds (EFTs). ETFs allow you to buy and sell shares any time the market is open. They’re also typically available at no commission, saving you from the markups your local coin dealer will charge.

Unlike physical silver, ETF’s, Futures and other silver derivatives are liquid.

If you are more interested in stocks, iShares Silver Trust (SLV) is the biggest and most liquid ETF on the market.

There is also the Sprott Physical Silver Trust (PSLV), which is different from other silver ETFs because it allows owners to redeem their shares for physical metal and sometimes has premiums when the silver market is hot.

You can also invest in individual silver miner stocks such as Pan American Silver Corp. (PAAS), Fresnillo (FNLPF) and MAG Silver Corp. (MAG).

Silver as a Multifaceted Commodity 

Similarly to gold, silver can be seen as a “safe-haven investment” during the end of a bull run because it is a hard asset that holds tremendous value. It can also be viewed as an alternative currency to fiat currencies such as the U.S. dollar or euro.

However, unlike gold — which is largely used for either investments or jewelry — silver straddles both the investment world and the industrial sector, as it is used in solar panels, electrical switches, medical equipment and more.

Industrial use and supply affect silver’s value, which is one of the reasons why silver production depends on the health of the economy and the industrial sector.

Because silver is a byproduct, base metal miners are unlikely to ramp up production if silver demand suddenly spikes.

Day states, “This is why silver can have such dramatic moves because the supply doesn’t always respond to the price.”

Hopefully, your eyes have been opened to the amazing opportunities that exist in investing in silver. It’s a great way to diversify your portfolio and a way to open the door into other precious metal investments.

To a richer life,

The Rich Life Roadmap Team

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