If you want to invest in a real, tangible asset that you can hold in your hands, you can’t go wrong with precious metals. But metals like gold, palladium, and platinum can be prohibitively expensive for the average investor. Silver is the cheapest precious metal, so it’s the most accessible to the average investor just dipping their toes into commodities investments.
You can invest in silver by simply buying silver coins or bullion, but if you don’t want to buy physical silver, you can still invest in this commodity. You can buy stocks in silver mining companies, refineries, and streaming companies. You can also buy shares in one or more silver mutual funds investing in physical silver, silver futures, or silver stocks. Here’s how to protect your portfolio by diversifying into silver.
Silver Has Inherent Value
As a precious metal, silver has inherent value for use in jewelry, currency, and an astonishing array of industrial applications, including in growing industries like solar power. Because it has intrinsic value, silver’s worth doesn’t depend on the stock market. It can protect the value of your portfolio from inflation, because when the value of the dollar goes down, the price of precious metals goes up to compensate. And because precious metal prices tend to do the opposite of what the stock market is doing, adding some silver to your portfolio can help protect your wealth from market volatility.
Of course, because silver does have so many industrial applications, it’s worth is tied somewhat to the strength of the industries that use it. If an industry that relies heavily on silver for manufacturing suffers, the spot price of silver will go down. But over the long term, silver tends to gain value, just like other precious metals.
Physical Silver Needs to Be Stored and Insured
Silver is significantly cheaper than gold, palladium, or platinum, making it the precious metal of choice for new investors or those looking for an accessible commodity to diversify their portfolios. You can buy silver coins and bullion bars from online dealers, and either take possession of them directly, or have them shipped directly to a depository and stored.
But physical silver does need to be stored and protected from theft. If you’re planning to take possession of your silver, you’ll need a safe or vault at home to keep it safe. You may want to add it to your homeowners insurance. But because silver is so cheap — you can buy a 5 oz silver bullion bar for a fraction of the cost of even a single ounce of gold – it adds up quickly. It’s usually easier, and safer, to have your silver stored in a depository vault, where you know it’s safe.
Silver Stocks and Funds Are Easy to Buy and Sell
Another big problem with buying physical silver is that it can be hard to sell, especially if you need to sell it in a hurry. You can always find a coin dealer or pawn shop willing to take your silver coins or bars off your hands, but chances are you’re not going to get a good price. You may even have to accept less than the spot price for your silver.
If you have your silver bars and coins stored in a depository, it’s usually easier to sell them, because there’s been an intact chain of custody — your potential buyer won’t have to wonder what you did to your silver while you had it at home. Coins are usually easier to sell than silver bars, because most people just want to buy a little silver at a time.
You don’t have any of these issues when you invest in silver stocks, mutual funds, and exchange traded funds (ETFs), exchange traded notes (ETNs), or exchange traded commodities (ETCs). You can buy stocks in silver companies, or invest in mutual funds that buy silver company stocks, silver futures, or even physical silver. ETFs, ETNs, and ETCs all track the spot price of silver, but there are differences between them — ETFs do this by buying and selling the commodity in question, or by buying and selling commodity futures. ETCs and ETNs are underwritten by a financial institution instead, so they’re structurally different and there’s a risk that the underwriter could default on their obligations.
However, unlike silver, investing in these “paper silver” assets can get you better returns and more money. Just like when you buy any company’s stock, when you buy stock in silver mining, refining, and streaming companies, you’ll get returns when the company does well. You’ll also get dividends quarterly, whereas when you buy physical silver, you don’t get any returns until you sell it. And because paper silver can be bought and traded from any brokerage account, without the need to store or insure a physical asset, these kinds of investments are usually easy to liquidate for the best price when you need to.
Investing in silver is a great way to strengthen your portfolio. It’ll protect against inflation and market volatility, and could even bring you some nice returns. Add some silver to your portfolio, and find out how gratifying it is to invest in precious metals.