It used to be that there was only one way to buy silver and that was to purchase physical silver. There are many other ways to invest in silver in 2014.
Silver and gold are the two precious metals most commonly sought by investors. Between the need for diversification, protection from inflation and concerns over currency manipulation, there are many reasons to invest in these metals.
With more industrial use than gold and a lower price tag, silver is a much more approachable metal for many investors. And with silver trading below $20 – the same price as in late 2010 – investors are looking at 2014 as a great time to buy silver.
But how does one buy silver? Here is how to invest in Silver in 2014.
How to Invest in Silver Option 1: Physical Bullion or Coins
The first way to invest in silver is to purchase silver bars, coins or even scrap silver. You probably even have some lying around the house. Between old coins made out of silver and little trinkets or pieces of real silverware, you might already have more silver around than you first thought.
There is also an entire industry devoted to selling physical silver and gold. Between pawnshops, jewelry stores and large companies like Goldcorp (NYSE:GG) that operate through the mail, there are many ways to acquire physical silver.
How to Invest in Silver Option 2: Silver ETFs
While not the same as owning physical silver, there are several ETFs – Exchange Traded Funds – that accurately track the price of silver. For example, if the price of silver rises 1% then the value of the silver ETF will rise by an identical or nearly identical amount, even though you don’t physically hold any silver when you own shares of the ETF.
The most popular silver ETF, the iShares Silver Trust (NYSE:SLV), contains assets of over $6.5 billion. As part of the trust agreement, a certain percentage of that $6.5 billion is held in physical silver and the fund administrator uses a mix of silver securities and futures to ensure the ETF tracks the price of the physical metal.
How to Invest in Silver Option 3: Silver Miners
A third option for silver investors is to purchase shares of companies that mine for silver. Large mining companies in this industry include Silver Wheaton (NYSE:SLW) and Pan American Silver (NASDAQ:PAAS), both of which pay regular dividends.
Advantages and Disadvantages
Physical silver is considerably more complicated and expensive to trade. It requires locating a physical buyer and you often receive less than the spot price of silver in order to make the deal. That said, if you find yourself unable or without time to access your ETF or stock holdings when you need to access your money then owning physical silver is a huge advantage.
I hold some physical silver as an emergency fund.
Silver ETFs – those that track the price of the commodity – offer instant tradability, a consistent market and low spreads. However they don’t offer dividends or the potential for capital gains beyond the rising value of the metal itself.
That said, while many of the mature silver miners offer dividends and the potential for investment gains, they are also subject to strict environmental regulation, fluctuations in the costs associated with mining as well as fluctuations in the value of their product: raw silver.
In my mind, the most efficient way to invest in silver is through the iShares Silver ETF that trades under ticker NYSE:SLV, which you can buy using any major trading platform. That said, I highly recommend keeping a small stash of physical silver as a rainy day fund.
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