Silver Investing Options

Silver is often referred to as “the poor man’s gold” because it is relatively cheap in comparison to gold, making it a much more viable investment option for many people.

Several options available for those interested in investing in silver are discussed below:

Physical Silver

Physical silver in the forms of coins, bars and rounds is a popular form of investment.

Coins

Silver coins may be purchased directly from brokers or websites. Today’s silver proof coins are typically 99.99% pure. However, many prefer traditional U.S. silver coinage such as Morgan and Peace Silver Dollars, Walking Liberty Half Dollars, silver quarters issued before 1965, and silver Mercury Dimes. Other popular coins include the 99.99% pure Canadian Silver Maple Leaf.

Advantages:

  • Relatively inexpensive
  • Small, easy to store, easy to transport
  • Instant convertibility into cash
  • Internationally negotiable

Disadvantages:

  • Must be stored securely
  • Yields no interest
  • Premium over bar prices

Bars

The most traditional form of silver investment, bars are available in a wide range of sizes from one troy ounce of 99.99% pure silver to 1000 troy ounces. There are several private silver mints and silver bars may be purchased directly from them. Silver bars can also be bought and sold over the counter at major banks in countries such as Switzerland.

Advantages:

  • Least expensive of the physical silver forms
  • Convertible into cash
  • Internationally negotiable

Disadvantages:

  • Must be stored securely
  • Possible need for assay at time of sale
  • Yields no interest

Rounds

Silver rounds are a cross between bars and coins. They are produced by numerous mints and usually contain an ounce of silver in the shape of a coin without the status of legal tender. You may order rounds with a custom design or in assorted batches.

 

Silver Exchange Traded Funds

ETF’s offer investors a simple way to buy silver shares in a trust that owns physical silver. Silver ETF’s are backed by physical silver and include: iShares Silver Trust (NYSE:SLV), Central Fund of Canada (TSX: CEF.NV.A, NYSE: CEF), ETFS Silver (LSE: SLVR), and ETFS Physical Silver (LSE: PHAG).

Advantages:

  • Exposure to physical silver market without the inconvenience of storage
  • Have major exchange listings and trade like equities

Disadvantages:

  • Unpredictable market price changes

 

Silver Mutual Funds

Several mutual funds specialize in silver by investing in silver mining stocks or in silver directly.

Advantages:

  • Offer investment programs in silver and other precious metals
  • Diversified holdings among dozens of companies

Disadvantages:

  • More expensive than investing in physical silver
  • Requires knowledge of equity market

 

Silver Mining Stocks

Rather than investing in silver directly, you may purchase share in companies that mine silver directly or indirectly. Only about one third of newly mined silver every year is produced from primarily silver mines. The rest is a byproduct of other base and precious metal mines, so you need not only invest in silver mines to profit from rising silver prices. Investors may choose to directly purchase shares in a mining company or mitigate their risk by investing in mining mutual funds.

Advantages:

  • Offers capital appreciation opportunities
  • May yield a dividend.

Disadvantages:

  • Requires a greater investment than in physical silver
  • Requires knowledge of equity market
  • More risk involved than in most other types of silver investment

 

Silver Certificates

Holding silver certificates of ownership for physical silver allows investors to buy and sell silver without actually having to transfer the actual silver. For further information, look into the Perth Mint Certificate Program (PMCP, which is the only government-guaranteed silver-certificate program in the world.

Advantages:

  • High liquidity at competitive prices
  • No storage risk
  • No sales tax
  • Prices widely quoted

Disadvantages:

  • Several days delay in delivery
  • Silver not in owner’s physical possession

 

Silver Accounts

Investors can instantly buy or sell silver electronically through silver accounts offered by most Swiss banks. These accounts are either backed through unallocated or allocated silver storage. The investor does not own the actual silver. They have a claim against the bank for a certain quantity. You can set up silver accounts through a variety of electronic services such as eLibertyDollar, e-gold, and GoldMoney.

Advantages:

  • High liquidity at competitive prices
  • No storage risk
  • No sales tax
  • Prices widely quoted

Disadvantages:

  • Several days delay in delivery
  • Silver not in owner’s physical possession

Silver Futures

Silver futures trade on various exchanges worldwide, such as on COMEX, which serves as a world reference for silver prices, in the U.S. and NCDEX in India. They offer an opportunity for those investors adept at correctly anticipating price changes. Investors trade anonymously through futures brokers. Silver futures contracts are commitments from traders to make or accept delivery of a specified quantity or quality during a specific month at an agreed upon price. Yearly, only about 1% of silver futures contracts actually result in delivery because traders usually offset their positions before the contract matures. Profit or loss is determined by the difference between the initial purchase price and the price at the time of the offsetting transaction.

Advantages:

  • Speculative appeal
  • Leverage reduces capital tie-up
  • Liquidity
  • Contracts widely quoted
  • No storage risk

Disadvantages:

  • Many trading limitations.
  • High risk factors
  • Unlimited loss potential
  • Requires market expertise