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How To Invest In Silver

silver coinsSilver has traditionally been a go-to precious metal for investors. Although considered more fluid and unpredictable than gold, it remains an excellent form of investment with a lot of potential. Each year, people purchase millions of the U.S. Silver Eagle and the Canadian Silver Maple Leaf coins as investments. Learn how to invest in silver and maximize your future profits with a few key considerations.

Why Invest in Silver?

Silver has been used as a form of money for several thousand years and it has been traded readily, which explains why it has retained its value today. Investing in silver is merely a means to take advantage of its potential for rewards later. Here are the reasons why buying silver remains popular with investors:

  • Affordability

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

  • Demand

Silver will always be an important part of the economy due to its wide range of uses and applications. Silver is not just for jewelry making but it also has medical and industrial applications, thanks to its innate properties. This precious metal may also have other properties that have remained unexplored and untested, so there is greater possibility that demand will continue. Demand is also expected to increase with the emergence of new markets, including India and China, so market investment in silver will remain active.

  • Supply

Of the leading countries that produce the most amount of silver, many remain unstable politically and have poor to fair infrastructures. These factors affect how often and how much silver is mined, who mines it and when it can be exported for use by other countries. The more unstable the area, the more likely it will produce less silver and affect the market. Silver supplies mined at the surface or near the surface is also running thin, so miners have to explore new deposits to meet demand. These factors could affect how much value will be associated with this metal.

  • Insurance

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

How to Invest in Silver

  • Physical Silver

Silver bullion is sold or traded as bars or coins, usually made available in standard sizes which are measured in troy ounces. Investors, for example, can buy silver bars and coins in 1, 10 and 100 troy oz. Silver bullion is 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 in the material, a characteristic that speaks for its relative purity.

junk silverAnother 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 have no or little numismatic value. Some of the most desirable coins of this type are dollar coins, half-dollars, quarters and dimes made in 1964 or earlier, and silver-containing nickels made during World War II (1942-1945). Junk coins made and circulated in other countries such as Canada and the U.K. are also excellent options, provided they were made in 1967 or earlier for Canadian coins and in 1946 or earlier for U.K. coins If the silver coin has a high numismatic value, it will, of course, fetch a higher price. These coins are usually sold by private sellers and dealers.

  • ETFs

ETFs or Exchange-traded funds are popular investment vehicles for precious metals such as silver. In this type of investment, the investor does not actually own the metal itself but its representation as indicated on paper. When an investor buys a share, for example, he is essentially buying an ounce of silver. The physical metal itself 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, however, 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.

  • Silver IRAs

Silver IRAs or individual retirement accounts allow individuals to stash money away for retirement and save on capital gains and income taxes. Storing money in the form of precious metal bullion offers a safe hedge against financial risks including inflation. Investing in silver IRAs will often 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 and the investor is expected to pay fees and other charges to maintain the account. Once the agreement is made, the physical metal changes hands and is transferred to the custodian who stores it on behalf of the client/investor.

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.