Introduction
Historically silver is valued as a precious metal that has been treasured for thousands of years, used for jewelry, bars, or coins.
However, silver also has unique industrial uses, making it an attractive metal to invest in.
For instance, silver is an ideal choice for electrical applications, because it is the best electrical and thermal conductor of all the metals.
Source: Silver Institute
Why invest in silver?
Silver is a popular investment for many reasons. Some investors see it as a way to store value in uncertain times, while others see silver as a hedge against inflation.
In addition, in the same way, you can invest in gold to diversify your portfolio from shares, stocks, and bonds, silver could be an important part of your portfolio.
There are several ways that you can invest in silver. The principal question we will be answering in this article is how to invest in silver.
To determine which strategy is best for your investment goals, you can find below the top 5 silver investment strategies:
- Silver bullions
- Silver coins
- Silver ETFs – mutual funds
- Silver futures
- Silver mining stocks
Investing in actual silver
Investing in silver by purchasing coins, bullions or jewelry is not for everyone.
Although silver is one of the most precious metals, its value remains high for thousands of years.
Below you can explore the two main forms of physical silver that you can invest in.
Silver bullions
Owning silver in physical form, either as bullion or numismatic is the most direct way to invest in silver.
If you want to invest in silver by purchasing physical silver there is an easy way to do it. You can simply walk into a bullion dealer or coin shop and walk out with silver.
However, bid-ask spreads may be quite large – about 5% – relative to those for bonds or stocks. Also if you choose to purchase online bullions or coins you should arrange secure shipping which means that you should check the additional cost of it.
Safe storage after the purchase could be also challenging and costly sometimes.
Companies that sell precious metals such as physical silver in bullions or coins can arrange the secure storage of them for a fee if you do not want to keep them in the safe of your house. You can also have a precious metals IRA paying for their services extra fee.
To properly set up an Individual retirement account (IRA), you will need to find a custodian that will permit you to keep precious metals like silver in the IRA. A depository that is approved will also be required.
Silver Coins
The numismatic way to own silver is also as challenging as owing silver bullions. Until 1964, the United States Mint had produced silver coins as currency.
These coins are valued for their precious ingredient but also for their value to collectors. This is based on their popularity, condition, and other factors.
Most of these coins are highly desired by collectors or investors and their demand has grown over the years.
Below you can find some of the most collectible silver coins that US Mint was producing:
American silver eagle
Adolph Alexander Wineman created the obverse to the Walking Liberty Half Dollar in 1916. However, it was again used for the American Silver Eagle coins.
They are among the most amazing coins the US Mint has ever produced. Most of these coins are now worth at least 100 times their silver values.
Peace Dollar
Among the many dollar coins made in the US Mint, peace dollars are the most sought-after and well-known.
They served as a symbol for peace and were produced from 1921-1928 and again in 1934-1935.
This coin was designed by Anthony de Francisci, which made it very desirable up to this point.
Morgan Silver Dollar
Morgan silver dollars have been produced for more than 40 years.
They are the oldest American coins to be in circulation. Collectors are always looking for well-preserved, old pieces.
These coins are difficult to track because they are over 100 years old. However, the 1893 S Morgan silver dollars in mint state are the most costly at approximately $20,000.
The Canadian Maple silver also is one of the most valuable silver coins with 99,99% purity.
Canadian Mint is the manufacturer of this silver coin which is interesting for investors seeking a valuable coin that will be easy to sell.
In the same way that you have to calculate extra fees associated with the purchase of silver bullion, you have to pay attention to bid-ask spreads during the purchase of silver coins as well as the secure storage fee if needed.
Investing in silver financial assets
Owning physical silver might not be the most effective way to invest in silver due to the increased fees and storage expenses.
Below we present more effective strategies of how to invest in silver by acquiring financial instruments.
Silver ETFs, mutual funds, mining stocks, and silver futures will be presented in order to choose the best way to invest in silver.
Silver ETFs – mutual funds
ETFs (exchange-traded funds) or mutual funds that own silver portfolios are the best way to invest in silver.
An excellent instrument to acquire if you are a US citizen is the iShares Silver Trust ETF (SLV) that has total assets of more than 10 billion.
Investors have been using this fund since 2006 to diversify their portfolio or protect it against inflation.
Like any other silver ETF, the iShares Silver Trust seeks to reflect the overall performance of the international silver prices. Practically, an ETF that owns physical silver delivers to investors the return on silver prices, minus the expense rate.
For example, the iShares Silver ETF expense ratio is 0,5%.
ETFs can offer you also another advantage.
The funds are highly liquid, so you can easily sell your shares at market price.
In addition, ETFs can be easily sold on at any time during trading hours.
It is very important to mention that most silver ETFs do not own physical silver. These funds invest in stocks of silver mining firms.
The most prominent example is Aberdeen Standard Physical Silver Shares ETF (SIVR).
Another prominent fund is Invesco DB Precious Metals Fund (DBP) which invests in stocks of both silver and gold mining companies.
If you are interested in how to invest in silver through ETFs check out the following providers:
| Logo | Best Investment Platforms | Econalert Rating | Fees | Account Minimum | Visit the website |
 | Saxo Bank | 5 | $0 | $0 | Learn More |
 | Interactive Brokers | 5 | $0 | $0 | Learn More |
 | SoFi Active Investing | 4.9 | $0 | $0 | Learn More |
 | E* Trade | 4.9 | $0 | $0 | Learn More |
 | TD Ameritrade | 4.8 | $0 | $0 | Learn More |
Silver mining stocks
A way to invest indirectly in silver is to buy shares of stock mining companies.
Silver mining stocks tend to rise when silver prices increase and fall when the silver price falls. Mining stocks will usually rise many times in percentage terms for every increase in silver bullion prices.
Nevertheless, silver mining companies will always face the non-systematic risk of running a company. Therefore, even if the silver market remains strong and silver prices increase, sometimes a fatal incident at a mining site might lead to a significant decrease in the stock price.
However, it can be hard to hedge against that company-specific risk, but you can have some protection by investing in more than two silver mining stocks.
An ETF that holds various silver mining stocks can be a good option if you do not want to do extensive analysis on each firm.
Some of the best performing silver miner ETFs are the following:
• ETFMG Prime Junior Silver Miners ETF (SILJ): Some of the fund’s top holdings are Hecla Mining Co. (HL) which is a gold and silver production company, First Majestic Silver Corp. (FR: TSE) which is a silver mining company based in Canada and Pan American Silver Corp. (PAAS: TSE) which is also a Canada based mining company.
• iShares MSCI Global Silver Miners ETF (SLVP) is considered a global fund that most of its holdings are based in Canada.
• Global X Silver Miners ETF (SIL) investing in silver mining companies based in Canada, Russia, and the USA
Silver Futures
Silver futures allow you to bet on the falling or rising price of silver without having to own any physical silver.
Silver futures offer a high level of leverage which makes them a popular way to invest in the silver market. To put it another way, you need relatively low capital to hold large positions in the metal. If silver futures trend in the right direction, then you will make a lot of money.
However, you can also lose a lot quicker if you bet in the wrong direction.
The leverage in futures contracts works in both directions, so it can increase your gains or decrease your losses. If the market turns against you, you will have to pay more to maintain the position. The broker will close your position and leave you with a loss.
Futures are riskier than traditional trading and better suited for skilled traders. A large account balance is required to start trading.
In addition, futures trading is only offered by a handful of online brokers.
Should I invest in silver?
Silver has been used as a currency for a long time as well as a store of value. It is unlikely that it will ever lose its value.
The greatest benefit to silver exposure is the low correlation between the silver price and other financial assets like stocks or bonds.
Assets that have a low correlation in a portfolio can increase returns and lower overall portfolio risk.
There are many options for investors who want to add silver to their portfolios. You can invest in silver bullions and coins, mutual funds, stocks of silver mining companies, ETFs or directly owning futures contracts.
Whatever you choose you should always consider your personal risk tolerance before investing in silver or other commodities.
In general, a well-known strategy is a silver or other commodities to have a 10% of a total portfolio allocation (see for example All-weather portfolio of Ray Dalio).
In order to find the best way how to invest in silver, you can evaluate the pros and cons of the different types of silver investments that we have presented above and find which one matches your investment objectives.