Make no mistake when it comes to Investing in physical silver the silver market has been volatile for the past 20 years, with a huge bull market developing through most of the 2000s and early 2010s, giving way to a big setback in recent years.
Now, however, some see silver as an investment that could tap into industrial demand gold ira companies reviews, especially if new supply is constrained by lower prices. However, many do not know how to buy silver or why investing in silver can be lucrative.
By understanding how you can invest in silver, you will be in the best possible position to decide if it is the right move or occasion for you.
Buy real silver
The clearest way to invest in silver is to go out and buy the metal physically. Silver bullion is available in coin and bar forms, and most coin and precious metal dealers will offer silver bars in various sizes and formats. You can usually find coins and bars as small as a single ounce, or large bullion bars up to 1000 ounces.
Owning silver bullion has the advantage that its value tracks the market price of silver directly. However, there are a number of downsides.
First, you will typically pay a small premium to buy silver from dealers, and you will often have to accept a slight discount when you decide to sell it back to your dealer. If you hope to keep your silver for a long time, then those costs are not monumental, but for those who want to trade frequently, they are usually too expensive to bear multiple times in close succession. Additionally, bullion storage involves some logistical challenges and additional costs.
Buying silver ETFs
For traders, exchange-traded funds that own silver offer an effective substitute for direct possession of bullion. Each share of a silver ETF corresponds to a certain notional amount of silver, and ETF share prices generally follow silver prices closely. Like any mutual fund or ETF, silver ETFs have expenses that are charged to shareholders, but they tend to be quite modest. The iShares Silver ETF (NYSEMKT: SLV), for example, charges an annual expense ratio of 0.5%.
Some investors don’t like silver ETFs because they don’t give you actual possession of silver. Additionally, ETF shares can trade at a premium or a discount to the true value of silver, leading to some discrepancies based on when the shares are traded. However, to facilitate trading, ETF stocks allow you to participate in the general movements of the silver market.
Silver mining stocks
Another way to invest in silver through the stock market is by buying shares in silver mining companies. Silver mining stocks usually rise in value when silver prices rise and fall when silver performs poorly. Often times, for a given price increase in silver bullion, mining stocks will rise several times that amount in percentage terms. However, the challenge with silver miners is that they also have to deal with the risks involved in running a mining operation. Sometimes a mine accident or a poor exploration result for a potential property for silver will result in poor performance for a particular company, even if the silver market is generally strong.
Silver streaming companies
Finally, investors can choose to buy shares of silver streaming companies. These companies do not manage the mining operations themselves, but offer financing to the miners, recovering a royalty or passing on an interest in their production. Generally, streaming companies can buy silver production from their mining partners at a fraction of the current market price, offering them a way to get their money back and make a profit on their capital. So streaming company stocks go up and down with silver prices, but they are also affected by the quality of the financing deals they can arrange.
What is the right silver investment for you?
The best silver investment depends on your needs. If all you want is perfect exposure to silver as a commodity, then either physical bullion or silver ETFs work well, and the choice depends on whether you want to hold the real metal for a long time or trade.
For those looking for a return, mining stocks are more speculative, while streaming stocks offer more stability and often higher income. Mining is capital intensive, and most mining stocks pay no dividends. Streaming companies, however, often do not pay dividends, because as financial companies, they rely on healthy cash flow.
Investing in silver is not for everyone. But if you think the market is ripe for profit, then looking at the companies that have the most exposure to silver can give you the most profit if your beliefs turn out to be correct.