Investing in silver bullion
From Silver Bullion Bars, Coins and Rounds. Silver Ingots and Junk Silver. Silver Prices
Investing in Silver Bullion
Investing in silver bullion and the other precious metals like Gold, Platinum and Palladium is a very popular form of investing. For over five thousand years, silver and gold have been used as a form of money and store of value.
For the individual investor, silver bullion can be a very simple and effective way of diversifying investment assets and protecting money against the inflation.
Silver bullion is very cheap compared to gold which has risen to more than a $1200 per troy ounce. Demand for silver bullion is increasing where as the silver production from mines are not producing enough for supply.
Why invest Silver?
Investors buy silver bullion for one of three purposes: for survival purposes, as an investment or as an inflation hedge.
Investors who buy silver bullion for investment purposes look for price increases of silver bullion. The spot silver price has risen on 100% during the last years.
Investing in Silver bullion for protection against inflation get investors a very good inflation hedge.
Investors who buy silver and gold for survival purposes protect themselves from the global crisis. They fear that the Federal Reserve printing so many dollars that the dollar will become worthless. And they fear of a financial meltdown, which would close banks as in Paraguay and Argentina in 2002.
The benefits of investing in silver
Silver bullion is very popular hard asset with the unique characteristics:
- silver bullion has negative or weak correlation to price movements in the financial markets, especially the stock market;
- silver bullion products have a very good liquidity around the globe;
- silver bullion has retained its purchasing power during both inflations and deflations, a key characteristic in a time of domestic Dollar devaluation.
The most popular ways of investing in Silver bullion
There a lots of possibilities of investing in silver bullion:
1. Silver bullion bars - silver in the form of bars that are at least 99.5 percent pure. You can buy silver bullion bars with weights from 1 oz to 1000 oz. 1000-oz and 100-oz silver bars have the lowest premium over spot silver.
2. Silver bullion coins are the coins issued by a governments for investment purposes. Silver bullion coins are very attractive and liquid. The most known silver bullion coins are American Eagle bullion coins, Mexican Libertad coins and Canadian Maple Leaf coins.
3. Silver bullion rounds - round pieces of silver similar to a silver bullion coins but they not have legal tender status. Silver rounds may be issued by private mints or governments. Usually silver bullion rounds have weight of one troy ounce. The most known and popular 1-oz silver round is Engelhard silver Prospector.
4. Junk silver coins – circulated silver coins with silver content from 40 to 90%. Junk silver coins can be bought with very low or without premium over current spot silver prices. Junk coins are usually sold in Junk silver bags.
5. Silver Storage Accounts or Certificates – silver bullion is kept in storage and the investor can take possession within a few days if desired.
6. Silver Accumulation plans - enables investors to accumulate silver bullion on an average basis, but the investor does not own the physical silver.
7. Silver Forward Contracts or Futures - an agreement made on an exchange to take or make delivery of silver bullion at a set date in the future.
8. Silver Options - it is the right (but not the obligation) to buy or sell a silver bullion on a specified date in the future.
9. silver Exchange Traded Fund (ETF) - a basket of equities linked to silver, i.e. the physical silver bullion, producers, refiners, etc. ETFs are traded on exchanges throughout the trading day.
10. Silver Mutual Funds - an open-ended fund that holds a basket of silver-related equities that are priced once daily.
Why silver billion is better than gold billion?
Silver has always generated a greater percentage increase than gold during precious metals bull markets.
If you want to invest in precious metals less than US$10,000, you should buy exclusively silver bullion products with the lowest premium: 1000 and 100-oz silver bars, 1-oz silver bullion rounds and junk silver coins. If you want invest larger amounts in precious metals you can buy also gold bullion products: gold bars and gold coins.
There are also disadvantages of investing in silver bullion. At current prices, investing in silver bullion results about fifty times the bulk and weight than the same investment in gold bullion. Large investments in silver bullion create storage and handling challenges for most people.
Investing in silver bullion: silver bars, silver coins or silver rounds?
This depends on your level of investment. It is good idea to diversify and hold a blend of government guaranteed, brand name and private label silver bullion bars, silver coins and 1-oz silver rounds.
American Silver Eagle, Mexican Libertad and Canadian Maple Leaf are the best known and the most liquid silver bullion investments. But silver bullion coins also have the highest premium over spot silver compared to silver bars or silver rounds.
Silver bullion rounds have one of the lowest premium over spot silver price, usually less than half the premium of legal tender silver bullion coins.
Exchange-Traded Funds (ETFs)
Advantages:
For investors who seek exposure to the physical silver market, but have no desire to possess the metal or pay direct insurance, assay, and storage costs, ETFs offer an alternative. They have major exchange listings and trade like equities. Investors can buy shares in a trust that owns the silver bullion.
Disadvantages:
Because the ETFs are created to reflect the price of the silver, the market price can be as unpredictable as the price of silver on any given trading day.
Silver Bullion Bars
Advantages:
Usually the least expensive option. Easiliy convertible into cash and internationally negotiable. Price is widely quoted. Silver bullion Bars are very liquid.
Disadvantages:
Silver bars must be stored securely. Possible need for assay at time of sale. Yields no interest.
Silver Mining Stocks
Advantages:
Offers capital appreciation opportunities. Dependent on the company's management and operating strength. May yield a dividend.
Disadvantages:
May require greater investment than small physical silver bullion purchases. Requires knowledge of equity market.
Silver Mutual Funds
Advantages:
Many mutual funds offer investment programs in silver and precious metals. Diversified holdings among dozens of companies.
Disadvantages:
May require greater investment than small physical bullion purchases. Requires knowledge of equity market.
Silver Bullion Coins
Advantages:
Relatively inexpensive, some less than US$20.00. Small and easy to store. Silver Bullion Coins are very liquid and instant convertibility into cash. Silver coins are easy to transport, internationally negotiable and their prices quoted widely.
Disadvantages:
Silver Bullion Coins must be stored securely. They yields no interest and have higher premium over silver bullion bar prices.
Silver bullion rounds
Advantages:
Prices can range from least expensive to most expensive but the carry low premium over spot silver. Silver bullion rounds are small and easy to transport and store.
Disadvantages:
Similar to silver coins, but not always easily convertible to cash unless they bear the mark of a reputable refiner. The most known silver rounds are Engelhard Prospectors.
Silver Certificates or Storage Accounts
Advantages:
High liquidity, but at competitive prices. No storage risk. No sales tax. Prices widely quoted. Invest by dollar amount.
Disadvantages:
Several days' delay in delivery of silver. Silver not in physical possession of owner.
Silver Accumulation Plans
Advantages:
Invest as little as $100...Discounted commission rates...Highly liquid...No sales tax...Offers dollar cost averaging...No storage fees.
Disadvantages:
Silver not in physical possession of owner.
Silver Futures Contracts
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.
Silver Options
Advantages:
Speculative appeal. Leverage reduces capital tie-up. No storage risk. Clearly defined risk.
Disadvantages:
Trading limitations. Highest risk. Less negotiable and less liquid. Investor must be willing to sustain the loss of their entire investment in a commodity option. High degree of knowledge required.
