Investing in silver can be a wise financial decision, but it comes with nuances and considerations like any investment. Whether you’re a novice or a seasoned investor, you might wish you had known several critical aspects of silver investing earlier. This article will explore 10 essential insights to help you make more informed decisions when investing in silver.
10 Things I Wish I Knew Sooner About Investing in Silver…
1. Understanding the Different Forms of Silver
Silver comes in various forms, each with its own advantages and drawbacks. You can invest in physical silver, such as coins or bars, or consider silver ETFs and mining stocks. Physical silver comes in bullion, which is investment grade, it means it’s the purest form of silver, meaning you’ll pay a lower premium compared to a numismatic or collector coin, which comes at a higher premium than generic bullion because it also comes with a story behind.
Also consider that the higher the denomination, the lower the premium, meaning 1,000oz bar will have a lower premium than a 1oz coin. Remember that the higher the manufacturing cost, the higher the premium. So purchasing silver in 1 gram increments will be much more expensive percentage-wise than buying in 1, 10, of 100 ounce increments. You can also purchase “junk silver”, which is constitutional coins, like quarters, dimes, nickels that have silver content in them, typically 40% or 90% silver.
Now, when investing in paper silver, like ETF’s or mining stocks, its important to read through the prospectus to truly understand what it is that you are investing in. For instance, the value of silver could be rising, but due to a bad acquisition, poor management, or a variety of reasons, the value of a silver mining stock could be going down. It’s crucial to grasp the distinctions between all of your options and choose the one that aligns with your investment goals and risk tolerance.
2. Historical Performance of Silver
A thorough understanding of silver’s historical performance can provide valuable insights. Silver has proven to be a store of value for centuries, and analyzing its price trends over time can help you make more informed predictions about its future performance.
For example, when President Nixon took the U.S. off of the gold standard in the early 1970’s, silver prices rose dramatically, but it wasn’t until the high inflationary period in the late 1970’s that silver exploded higher.
However, when prices rise dramatically in a short period of time, they generally fall dramatically as well. From 1980 to the year 2000, the price of silver fell to levels experienced between the increase after the separation of gold from the monetary system in the early 70’s and before the inflationary period of the late 70’s.
Then with 9/11, The war in the Middle East, and the Great Recession of 2008, silver prices rose back to a new all time high in 2011. And just like the rise in the 70’s, silver fell back to the levels experienced after the beginning of the wars, but before the great recession. Currently silver prices are starting to climb again in the early 2020’s as inflation runs rampant in the economy.
3. Silver as a Hedge Against Inflation
One of the primary reasons investors turn to silver is its role as a hedge against inflation. It tends to retain its value when fiat currencies depreciate. Knowing how silver can safeguard your wealth during economic downturns is essential.
Silver is money. It’s written into our constitution. When you understand that the Federal Reserve is neither Federal or has any Reserves, you understand that quantitative easing (money printing) is the inflation of the currency supply, causing prices to rise against the value of that currency.
Owning silver as a hedge against inflation has stood the test of time. While thousands if not tens of thousands of fiat currencies have come and gone throughout the millennias; silver has always retained it’s value.
4. Supply and Demand Dynamics
Silver, like any commodity, is subject to supply and demand forces. Understanding the factors that influence silver’s availability and the industries it’s vital for can guide your investment decisions. The Silver Institute releases an annual report on the Supply and Demand numbers for silver.
We can see an increase in the demand for silver for solar production. As the world moves towards a green-initiative, the increase in demand for solar should continue to grow, subsequently causing a continued increase in the demand for silver.
5. Industrial and Technological Uses of Silver
Silver has numerous industrial applications, from electronics to healthcare. An awareness of these uses can help you gauge silver’s long-term prospects as industries evolve.
6. Diversification Benefits
Diversifying your investment portfolio is crucial for risk management. Silver can be a valuable addition to your investments, as it doesn’t always move in tandem with other assets like stocks and bonds. We like the idea of diversification outside of paper assets.
True diversification means you have both real hard assets like gold, silver, and real estate and paper assets, like stocks, bonds, and currencies. That is true diversification. Having your money spread out in different stock market sectors is not proper diversification because you are still all exposed to a general stock market decline.
Many investors feel trapped as the majority of their wealth is tied up in IRA’s, but did you know you could rollover a portion or all of your IRA into a gold, silver, or precious metals IRA? Check out our IRA page for more information.
7. Storage and Security Considerations
If you decide to invest in physical silver, you must address storage and security concerns. Learn about the various storage options, such as vaults or home safes, to protect your precious metals. Check out our MetalsEdge Account for one the best storage options available right now.
With our MetalsEdge Account your metals are titled and allocated in your name and your name only. They are also audited on a regular basis and double-insured against theft, loss, and damage. You can buy and sell with a simple phone call, and of course you can request delivery of your metal at any time.
8. Market Volatility and Timing
Like any investment, silver markets can be volatile. Timing your entry and exit points can greatly impact your returns. Understanding market cycles and trends is vital.
One great investment strategy is the dollar cost average strategy, meaning you buy the same dollar amount at the same interval. So you end up getting more silver when the price is down, and less silver when the prices is up. This is the go-to strategy for passive investors.
If you want to be more active, you can use fundamental analysis and technical indicators like moving averages, RSI’s, and trendline analysis to try and pick better entry points. All investments and strategies come with risk, be sure the strategy you decide to use fits within your investment goals and risk tolerances.
9. Tax Implications
Different tax regulations apply to silver investments, depending on your location and the form of silver you choose. Being aware of tax implications can help you plan your investments more effectively. Meet with a licensed tax attorney or CPA to learn more.
10. Ongoing Education and Monitoring
Investing in silver, like any financial endeavor, requires ongoing education and monitoring. Staying informed about market developments and economic factors is essential for making informed decisions. One of the greatest advantages of our MetalsEdge Account, is that you work 1-on-1 with a precious metals specialist, who’s job it is to watch the markets and make recommendations, and you’ll be able to contact them directly with any questions about your account or the markets in general.
To get started, simply book your Free, No-Obligation Precious Metals Strategy Call.
Investing in silver can be a rewarding addition to your financial strategy, but it’s essential to be well-informed about its various aspects. The 10 insights discussed in this article can help you navigate the world of silver investment more effectively and make decisions that align with your goals and risk tolerance. Remember that investing always carries some level of risk, so conducting thorough research and staying informed is crucial for success in the silver market.
1. Is silver a safe investment?
- Silver can be a safe investment, especially as a hedge against inflation and economic uncertainties. However, like all investments, it carries risks. It’s essential to diversify your portfolio and consider your financial goals and risk tolerance.
2. How do I buy physical silver?
- You can purchase physical silver from reputable dealers, online or in-person. Options include buying silver coins, bars, or rounds. Ensure that you choose a reliable source and consider storage solutions.
3. What are silver ETFs, and how do they work?
- Silver ETFs (Exchange-Traded Funds) are investment vehicles that typically track the price of silver. They allow you to invest in shares that should represent silver without owning physical metal. ETF shares can be bought and sold on stock exchanges.
4. Is now a good time to invest in silver?
- The timing of your silver investment depends on your financial goals and market conditions. It’s wise to research current market trends and consult with a financial advisor before making any investment decisions.
5. What is the role of silver in a diversified investment portfolio?
- Silver can play a role in diversifying your portfolio by acting as a counterbalance to traditional assets like stocks and bonds. It can provide stability during market downturns.
6. How do I store my physical silver securely?
- You can store physical silver in a home safe, bank safety deposit box, or in a secure private vault. Each option has its advantages and disadvantages, so choose the one that suits your needs.
7. Are there any tax implications when investing in silver?
- Tax regulations vary by location and the form of silver you invest in. It’s advisable to consult with a tax professional to understand the tax implications in your specific situation.
8. Can I sell my silver investments easily?
- Selling silver investments is relatively straightforward. You can sell physical silver to dealers or on various online platforms. Silver ETF shares can be sold on stock exchanges.
9. What are the long-term prospects for silver?
- Silver’s long-term prospects are influenced by factors like industrial demand, technological advancements, and global economic conditions. While it has a history of retaining value, it’s essential to stay informed about these factors.
10. How can I stay updated on silver market trends?
- To stay updated, you can follow financial news, read reports from reputable sources, and consider subscribing to newsletters or joining online forums and communities dedicated to silver investment.