For over 4,000 years, silver has been regarded as a form of money and a store of value.
In fact, the words for "silver" and "money" are the same in at least 14 different languages.
As an investment, silver remains one of our favorite vehicles for wealth accumulation. However, there are several different ways to participate and profit from the ongoing silver bull market.
Investors must decide between silver bars. . . coins. . . ETFs. . . ETNs. . . stocks. . . certificates. . . pooled accounts. . . forwards. . . options. . . futures. . .
The list goes on and on.
It can get very complicated, and investors can easily become overwhelmed by the intricacies of the more complex investment products.
So, we've whittled down the docket of silver investment options to come up with the top ways to invest in the silver market today.
The 3 Best Ways to Invest in Silver
Investment #1: Silver Bullion
The simplest and most traditional way to invest in silver is to own the physical metal. Although in some countries silver bullion can be bought and sold over the counter at major banks, a more common method today is buying online through approved vendors.
Silver bullion is generally sold in two forms: bars and coins.
Silver bars vary in weight from around one ounce to over 1000 ounces. There are approximately 100 active silver refiners around the world whose bars have earned “good delivery” status from one or more of the associations and exchanges. Well-known brands include Engelhard and Johnson Matthey.
Silver coins are another popular way to invest in silver bullion. Many countries, including the United States, Canada, Austria, and Mexico, mint official legal tender silver coins with .999 purity.
Both silver bars and silver coins are priced according to their weight and purity, but they always carry a premium above spot silver prices. We recommend investing in silver bars because the premiums are always lower than coins.
Investment #2: Silver Exchange-Traded Funds (ETFs)
Next in line are silver Exchange-Traded Funds, or silver ETFs. Instead of owning the metal outright, silver can be bought in the form of a security on some of the world's major stock exchanges.
Silver ETFs track silver's spot price and can be traded much like any other security. The drawback here, however, is the cost of ownership. With issuing companies applying management fees to the certificate, the certificate's value diminishes over time as the silver represented is sold off in small quantities.
In the United States, revenue from the sale of a silver ETF is treated as a sale of the underlying commodity. Thus, it's taxed at the 28% capital gains rate rather than the 15% long-term capital gains rate for non-collectibles.
Investment #3: Silver Production Stocks
Least direct of all are investments in the companies that pull the metal from the ground. Because mining companies that mine silver usually mine other metals alongside it, the share price of such an outfit is rarely dependent on the price of silver alone.
Another factor to consider is the process of leveraging. Because cost of production and cost of product can vary, profit margins — the main driving force behind share value — will exhibit wider fluctuation patterns than the price of the metal alone. A 10% spike in the price of silver may well lead to a 15-20% gain in the mining company's shares. Conversely, a drop in value will have a similarly magnified effect in the opposite direction.
As with any company, non-market factors such as management decisions will also play a role in the growth or decline of your investment. As a more speculative approach, buying shares can yield the biggest gains, but can also result in the more sudden losses.
Good Investing,
Greg McCoach and the Gold World team
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