How to buy silver
What you need to know to buy silver with confidence
Silver is a precious metal with numerous applications, and you can buy it in a number of different ways. It’s up to you to determine which is best for your specific needs and goals.
You can buy physical amounts of precious metals in several forms. Here are some of the more common options for buying silver.
Silver coins have both numismatic value and value as bullion. Numismatic value refers to the collectible value of certain coins, while bullion refers to coins in terms of the actual precious metals they contain.
Because of the increasing value of silver bullion, in 1965 the U.S. Mint began moving away from including silver in the coins it circulates for everyday use. As a result, coins in regular circulation today have no silver in them.
Contemporary investors often seek out 90% silver coins, but coins made with 35%, 40% or 99.9% silver are also valuable in terms of bullion.
Another way to purchase physical silver is in silver rounds. These unmonetized discs are like coins but aren't minted. Some rounds are plain, but most have some type of inscription on them.
There are a number of reasons to buy silver rounds:
- Silver rounds are often attractive – many have beautiful designs that aren't as static as coins.
- Rounds also have relatively standardized compositions.
- Most rounds are relatively consistent in terms of weight and fineness, making it easier to know just how much actual silver you have.
- You can also often purchase rounds at a lower price than you would for traditional coins.
Silver bars and ingots
Physical silver is also commonly found in the form of silver bars or silver ingots. These are relatively easy to buy for investment purposes, and they're one of the best ways to buy silver close to market price. Bars are arguably not “pretty” like coins (and they miss out on any potential numismatic value), but they are a good way to stockpile silver.
How to invest in silver
Some investors prefer not to invest in physical silver because it’s hard to move and difficult to store safely. There are several other ways to invest in precious metals, though.
You can purchase silver stocks at an exchange, much like you would buy any other type of security. Buying silver stock means you're investing in a company that’s somehow involved in the silver industry; for example, you might buy stock in a mining company. Stock prices are based on the market value of that company rather than the metal itself.
Likewise, when you purchase a silver future, you're not actually buying silver. Silver futures are contracts where the buyer agrees to purchase silver at an upcoming time for a specific price. Futures let you leverage your purchasing power, but they can also have more risk than other investment vehicles.
Self-directed silver IRAs let you purchase physical silver as a retirement investment.
Silver options are somewhat like futures in that these investments are typically related to the future market price of silver. Options give their owners the right to buy or sell the underlying asset at a predetermined price. Gold options can be risky investments, so it's important that you understand the risks involved before buying.
With silver exchange-traded funds (ETFs), buyers invest in fixed amounts of silver. However, these funds are usually more convenient than buying physical silver because you don’t actually get access to the metal. ETFs are traded at stock exchanges, and they often have low minimum investment requirements.
Silver mutual funds and ETNs
Two final options are investing in silver mutual funds and exchange-traded notes (ETNs). ETNs are somewhat like ETFs, but an ETN does not hold the asset it tracks — instead, it's an unsecured debt security that another organization underwrites.
Silver mutual funds generally don't have actual physical silver as their asset, either. Mutual funds represent a pooling of funds from multiple investors to make larger purchases.
Pros and cons of investing in silver
Is silver right for you? Take a look at the pros and cons of investing in silver to determine if it’s the right type of investment for your particular needs.
- Silver bullion may be a good option for hedging against inflation.
- Silver’s volatility creates frequent opportunities for new buyers.
- Demand for silver may increase with industrial needs.
- Physical silver is expensive to store and transport.
- Silver’s volatility can make investing riskier than with gold.
- Economic downturns may lessen industrial demand.
Bottom line: Is silver a good investment?
While silver is a precious metal with some intrinsic value, it's also useful in a number of industrial applications. Silver is used to make electronics like appliances and semiconductors, among other things. As a result, silver’s value tends to go up when economic conditions improve because more people are buying consumer goods. This is one reason silver is more volatile than gold, though.
It’s hard to say whether silver is good or bad for an individual investor without knowing details about their situation and goals. Silver offers a number of advantages as an investment, but every investment has risk. When you invest in silver, you’re making a bet based on how you expect its value to change over the coming months or years. If you’re looking to buy silver, do your research beforehand and work with a reputable precious metals dealer throughout.
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