Investing in Silver: Steps to a Healthier Portfolio

Silver coins are relatively inexpensive and liquid; the coins are, also, easy to store and insure. The price of each 1 oz. coin will usually follow the price of silver spot price.

However, silver coins do not provide any interest, and should be insured and stored safely. Investing in silver coins also does not provide leverage like other silver investing methods. Usually buyers must pay a premium over spot to cover the cost of minting the coins.

Silver bullion is generally the lest expensive because the costs associated with minting isn’t a part of producing bullion bars. The price of certified bars will closely follow the spot price of silver.

However, like many silver investments, bullion yields no interest and follows the volatile market of silver — where huge price movements can wipe out a portfolio’s value. There is also the possibility of proving the authenticity, and purity of the silver.

Silver ETF like iShares silver ETF or an ETF of silver mining companies provides investors with an exposure to the silver market without the costs of storage, insurance, and liquidity gaps. ETFs provide the investor with a security representing a trust holding silver bullion.

Although — there is an on-going debate about the iShares Silver ETF actual stock of silver bullion. Some investors believe the iShares Silver ETF does not hold any silver, therefore is nothing more than a ‘worthless’ security.

A true, dedicated silver investor wants to hold as little paper money as possible because of the historic decline of paper money.

Holding stock in silver mining companies will give investors an exposure to the silver market, and the possibility of company growth, which may lead to a dividend.

And yet, the companies future depends almost entirely on the management of the company. So, if poor management runs the company into the ground, the investors eat dirt — even if the price of silver soars.

Stocks also include holdings in mutual funds invested in silver mining companies. Much of the time, stocks and mutual funds will require a larger investment than small physical bullion purchases.

And even if the mutual fund is diversified among different mining companies, the fund is concentrated in one market.

This category includes investments in medallions, certificates or storage accounts, and futures contracts.

Medallions are very similar to coins because both medallions and coins are the least expensive option, are easy to store, and sometimes are harder to liquidate the investment.

Certificates or storage accounts are as liquid as mining stocks, but the silver bullion isn’t physically held by the investor.

And futures contracts are most likely the largest capital investment, requiring an upwards of $5,000 per contract. And, along with the high risk, a futures contract can have unlimited loss potential. Futures contracts aren’t for most investors.

Tags: investing-in-silver, silver investing, silver-portfolio

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1 Comment to Investing in Silver: Steps to a Healthier Portfolio

1. [...] are numerous ways to invest in precious metals these days. Bullion and rare coins have always been investment options, and they’re still good [...]
» Silver Mutual Funds Offer Another Option for Investors on August 28th, 2007