Tyler Robinson - November 08, 2021
Everything You Need to Know About Investing in Silver
Did you know that investing in precious metals is one way to guard your wealth against economic uncertainty? Many people flock to gold as a safe haven. But have you considered investing in silver? Read on to learn how to invest in silver and what makes it a good asset to add to your portfolio.
Why Should You Buy Silver?
The silver value has returned around 248% in the past 20 years. It offers a hedge against inflation and falling stock prices, as precious metals tend to keep their value over time.
Silver trades at much lower prices than gold, making it a more affordable investment. The gold to silver ratio reached a high above 100 in the market volatility of 2020, meaning that you would have needed more than 100 ounces of silver to buy one ounce of gold.
While silver is cheaper to buy than gold, the price is more volatile, so you can make more money from buying low and selling high. Even when the price falls, you can still make money by holding silver and waiting for the market fluctuations to bring the price back up into profit.
If you take the time to understand and observe the market, silver can be a good investment for portfolio diversification.
1 oz Silver Buffalo Rounds. Photo taken at Investor Crate HQ circa 2017.
What Drives Silver Prices?
Silver becomes more attractive to investors during times of economic uncertainty when prices for stocks and bonds typically fall. Some of the financial drivers for silver prices include the value of the US dollar as well as central bank policies on inflation and interest rates. When the value of the US dollar weakens against other currencies, the silver value rises. Conversely, when the dollar rises, interest in silver falls. Falling interest rates and rising inflation make silver more attractive as a store of wealth. But higher interest rates and lower inflation make other assets more attractive than silver. Silver prices are driven by physical demand as well as investor interest. Around half of the annual demand for silver is for industrial consumption. Some of the products that use silver include:
- Electronic Devices
- Solar Panels
- Medical Devices
- Water Purifiers
- Wood Preservatives
With so many diverse applications, investing in silver allows you to gain portfolio exposure to global industrial activity. Demand in many of these sectors is forecast to grow in the future, especially for solar panels and electric vehicles. For example, the amount of silver used in the automotive industry is forecast to rise to 88 million ounces by 2025, from 61 million ounces in 2021.
Pile of Government Minted Silver Coins from UK Royal Mint and US Mint.
How to Invest in Silver
Are you ready to add silver to your investment portfolio? There are several different ways you can buy silver. These include:
- Physical Bullion
- Mining Company Stocks
- Open Contracts
- Exchange-traded Funds (ETFs)
- Exchange-traded Notes (ETNs)
- Mutual Funds
The type of silver investment you should choose will depend on your personal preference and investing goals.
You can choose a form of investing you're already familiar with, whether that's buying physical silver, investing in stocks, or trading options. You can diversify your investments by using more than one method. You can also opt to buy and hold silver for the long term or sell silver when the price reaches a certain level.
Various images of 1 oz Silver Bars as well as 1/2 oz Silver Coins in fresh mint tubes.
How to Buy Physical Silver
Buying physical silver bullion is a popular way to invest in silver. Physical silver is usually produced in coins, rounds, or bars for investment. They are easy to buy in large quantities and store at home or in a secure facility.
You can buy silver in person from a local dealer or from an online supplier. Governments, as well as private companies, produce silver coins with different designs; some of them are commemorative. These carry value as collectibles as well as investments, which can make them more profitable than their face value.
Silver coins contain 99.9% silver. The most popular coins among investors include the American Silver Eagle, British Silver Britannia, and Canadian Silver Maple Leaf.
How to Buy Physical Silver
If you decide to buy and sell silver in physical form, it's important that you find a reputable dealer to avoid buying counterfeit coins from scammers. You should research several dealers to find one with a good reputation that offers the best prices close to market rates. Be sure to check that they charge low fees, as high fees reduce your profits.
Buying silver from a local dealer means you can visit the store to examine the silver in person to make sure it's legitimate. But buying silver online is more convenient and prices are often lower. You can buy silver from an online seller at any time to capitalize on price fluctuations, whereas you can only buy from a store during opening hours.
Keep Track of the Market
When you invest in silver, it's important to keep track of silver prices to identify the best trading opportunities. Following the latest financial news and economic data will give you an idea of the expected direction of the market, helping you decide when it's a good time to buy or sell silver. If you don't have time to follow the market closely, you may want to limit your exposure to volatile silver derivatives, as these require active managing, and stick with physical bullion.
Buy Silver for Your Precious Metals Portfolio
Mastering how to invest in silver can be a profitable way to diversify your portfolio beyond stocks and bonds. You can trade silver stocks, funds, or derivatives to make a profit, or you can buy and sell silver in the form of coins, rounds, and bars.
If you want to get started buying physical silver, Investor Crate can help. Contact our team of experts to build your silver investment holdings.