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Investing In Silver

Silver is an important industrial metal that also serves as a popular alternative investment. But is it worth holding in a balanced portfolio?

Silver’s uses are widespread, with industrial silver being used in the manufacture of electronics, alloys, solar panels, electrical components, preservatives and even deodorants.

Silver (AG) has a number of properties that make it useful from an industrial standpoint – and indeed, the bulk of demand for silver comes from the manufacturing industry.

But silver is also a very popular investment option, with demand for silver bars, coins and jewelry counting for a significant portion of the annual demand for silver.

Is silver a good investment? Is it worth investing in silver, or does this metal belong more on the factory floor than it does in a modern portfolio?

Investing in silver

Disclaimer: This page is intended for informational purposes only. It should not be considered as financial or investment advice. You should speak to a certified financial professional to determine the best investment mix for your specific situation.

Silver as an Investment

Silver has been used as a store of value for thousands of years. Today, it’s still very important for manufacturing, and also serves as a popular alternative investment class.

But is silver a good investment?

It’s a controversial question, to be sure. One thing is certain: silver is a volatile asset class.

Source: SilverPrice.org

It’s also largely uncorrelated with most other asset classes, meaning that it often moves in the opposite direction of equities, bonds and real estate. Silver tends to perform well during times of economic and geopolitical uncertainty. These characteristics make silver a useful diversification tool, which may help to smooth out the rough patches for your overall portfolio.

Over the long-run, silver may serve as an inflation hedge. And depending on the economic conditions, it can make for a good investment, as well.

Silver is a hard-asset, that doesn’t rely on the promises of any government or institution. It’s a real, tangible asset that can be traded easily, which appeals to many who prefer to have some independence from government currencies and the modern financial system.

Silver is not as popular an investment as gold, but it has much of the same characteristics. It may also be more undervalued than gold, as of the time of this writing.

For one, silver supply is tight, and mining operations are expensive. In fact, many large silver miners spend more to mine each ounce than the silver is currently worth! This suggests that silver may be trading below it’s true value – although this is impossible to fully predict, of course.

Silver investment is not for everyone – but it can be a valuable addition to a balanced portfolio.

How to Invest in Silver

To get some silver exposure in your portfolio, there are basically three options:

  1. Buy physical silver bullion from a trusted local dealer like Bellevue Rare Coins
  2. Invest in silver trust ETFs like the iShares Silver Trust (SLV)
  3. Invest in silver mining stocks, or ETFs that track an index of silver miners

You could also buy silver futures contracts, silver jewelry, pre-1964 US coinage, etc. but the three options listed above are the most popular.

Most people that invest in silver also invest in other precious metals – see our full precious metal investment guide for more information.

What’s the “best” way to invest in silver? We tend to prefer physical silver bullion, as you can actually hold it in your hand and know that you truly own it.

With that said, there are pros and cons to every method. Physical silver has the benefit of being a tangible, highly liquid investment class – but it also has the issue of safe storage to contend with.

“Paper” silver, meaning digital investments in silver trusts like SLV, have the benefit of being highly liquid and don’t have the same storage issues – but, they have management fees. And more importantly, they are not the same as owning physical silver. In the event of a natural or geopolitical disaster, or the extreme case of a financial collapse, digital investments will not serve the same protective role as physical precious metals might.

Silver miners are one category we recommend avoiding completely. Mining companies are highly volatile, and levered to the price of silver. They have also historically been mismanaged to the point where they often underperform the price of the silver they mine!

Bottom line – we believe everyone who is interested in silver investment should at least hold some physical silver. Nothing compares to an investment class you can hold in your hand, and transport easily in an emergency situation. So, what’s the best way to invest in silver bullion?

 

Investing in Silver for Retirement

If you’re investing in silver as part of your retirement portfolio, there are some tax considerations to keep in mind. Essentially, silver bullion is taxed differently than most investment classes. You should speak to a tax adviser to figure out the best strategy.

The best way to invest in silver for retirement is to use a self-directed IRA program. These programs allow you to purchase physical silver bullion, while enjoying the beneficial tax perks of an IRA retirement plan.

Click here to learn more about our self-directed IRA program.

How to Invest in Silver Bullion

If you decide to invest in physical silver bullion, here are some things to keep in mind.

 

Popular Silver Bullion Investments

There are many different silver bullion products to invest in, but here are some of the most popular.

 

Silver Bullion Coins

investing in silver coinsThe most popular investment-grade silver bullion coins are primarily produced by government mints. Silver bullion coins are mostly 1 troy oz each (~31.1g), although you can sometimes find larger coins (i.e. the 2oz Fiji Taku). These government-minted silver coins typically carry a premium of $1.50-$3+ over spot price, but the premium is often worth it for the increased liquidity of these coins. Some of the most popular are:

American Silver Eagle – the American Silver Eagle (ASE) is the official silver bullion coin of the US Mint, containing 1 troy oz of .999 pure silver. It’s also the most popular silver bullion coin in the world (over 37 million ASEs were minted and sold in 2016). The ASE is actually legal currency, with a face value of $1 USD. Of course, the silver value far exceeds the face value. Bellevue Rare Coins always has American Silver Eagles in stock, and we can pre-order the latest year’s coins if you request it! We are happy to sell any amount, from a single 1oz coin to multiple silver Monster Boxes of American Silver Eagles!

Canadian Silver Maple Leaf – The Silver Maple Leaf is the official bullion coin of the Royal Canadian Mint, containing 1 troy oz of .9999 pure silver. It’s the second most popular silver bullion coin (with over 32 million sold in 2016). The Maple Leaf is legal currency as well, with a $5 CAD face value. Investors appreciate that the Maple Leaf typically has a slightly lower premium than its American cousin. Bellevue Rare Coins keeps Canadian Maple Leafs in stock for local precious metals investors!

Other Government Silver Bullion Coins – Several other government mints produce investment-grade silver bullion coins. Other popular options include the Austrian Philharmonic, the Australian Kookaburra/Kangaroo/Lunar series, the Canadian Wildlife series, British Britannias, Mexican Libertads, Chinese Panda, and many others. You can shop a wide variety of silver bullion investment options at BRC!

90% US Silver Coinage (Pre-1964) – This option is not really bullion, but nonetheless it is one of the most popular ways to invest in silver. Every coin minted in the US before 1964 contained 90% silver, so today, pre-1964 nickels, dimes, quarters, half-dollars and dollar-coins are highly sought after. These coins hold little to no collector value, but their silver content far exceeds the face value. Thus, they are a popular, low-premium silver investment option. BRC buys and sells 90% silver US coins in bulk.

 

Silver Bullion Rounds and Bars

investing in silver barsMany private and government mints produce silver bullion bars and rounds of all shapes and sizes. It’s quite easy to find rounds in 1/2oz, 1oz, and 2oz sizes, while bars are commonly found in 1oz, 5oz, 10oz, and 100oz. Silver bullion bars typically have a lower premium than coins like the American Silver Eagle, and often trade for less than $1 per oz over spot (and even lower for larger bars). So, if your goal is to accumulate as much silver as possible, silver bars are likely the way to go!

Private Mint Silver Bars & Rounds – Many private mints produce silver bullion products. Some popular mints are Engelhard, JM, Apmex, Silvertowne, and many others. These private mints typically have the lowest-premium products – with the exception of JM and Engelhard, which have a bit of collector’s value and tend to carry a higher premium.

Government Mint Silver Rounds & Bars – Some government mints also produce silver bars, and less commonly, silver rounds (that differ from the silver coins, which typically have a face value). The Royal Canadian Mint is one of the most common.

Tips for Buying Silver Bullion

If you’ve decided to invest in physical silver bullion, here are some helpful tips to keep in mind!

Proper Sourcing – Buying high-value bullion and coins will always entail some risk. It’s vital to work with a trusted silver dealer. Do not try to buy silver off Craigslist or even a pawn shop – there’s a high likelihood that you’ll end up with fake silver or worse. If you’re new to precious metal investing, we recommend coming into Bellevue Rare Coins (we have locations in Tacoma, Lynnwood, Issaquah, Bellevue and Seattle, Washington) to work with the most trusted silver dealer in the Pacific Northwest!

Safe Storage – Once you have the silver in hand, you need to store it somewhere safe. Good options include well-hidden home safes and safe deposit boxes. Be sure to keep the fact that you own silver to yourself!

Liquidity – Silver is generally a very liquid asset. Any coin shop will buy silver for close to spot price, as will many online retailers. With that said, some products are more liquid than others. For example, American Silver Eagles are extremely popular and easy to trade almost anywhere, while 100oz silver bars may be more difficult to sell. Keep this in mind when deciding what types of silver bullion to purchase.

Premium Over Spot – It’s good to remember that most silver products will carry some sort of premium over spot value. So if the silver spot price is currently $15 per oz, silver bullion products will likely be trading for $15.50 to $18 per oz. Silver bars are generally lower-premium than American Silver Eagles and other silver coins. You can see our live pricing page to get a feel for the premiums that certain products carry.

Numismatic Value – In addition to their silver value, some silver coins also carry numismatic/collector value. Thus, some coins may be worth far more than their intrinsic silver value.