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How to Invest in Silver

Investing in Silver is exciting, and there is a number of ways to get your portfolio exposed to Silver, but it doesn’t come without its risks. Photo Credit: sxc.hu/profile/falconreid

With an unsure economy, and the potential for high levels of inflation, you might be wondering how to invest in Silver. Silver has been in the news a lot because of it being at historically high prices, and I want to provide some basic information that you can use to learn how to invest in Silver.

Precious metal investing is not for the timid at heart, so while I’m providing you information on how to do this, I’m not advising you to buy Silver.

Physical Silver, Custodial Silver and Paper Silver

There are a few ways for someone to invest in Silver. These include:

  • Purchasing Physical Silver
  • Purchasing Silver to be held in a custodial account
  • Purchasing “Paper” or Digital Silver

Let’s discuss some of these.

Buying Physical Silver

Purchasing physical Silver entails buying Silver that will be shipped to you for safe keeping. There are numerous ways to purchase physical Silver including:

  • Purchasing Silver on eBay
  • Purchasing Silver on Craigslist
  • Purchasing from Silver dealers

You can purchase government issued Silver such as Silver U.S. Dollars, Half Dollars, Quarters and Dimes or Bullion (Silver rounds and Bars). This Silver can be purchased on eBay, Craigslist or from reputable dealers (online and brick-and-mortar). Coin shops are an excellent place to start if you want to buy in person. Ensure that you educate yourself on identifying legitimate coins from fakes. There is a huge market for counterfeit coins and bars.

Reputable dealers abound, but online companies like Apmex, NWTMint and Kitco are well-known and respected.

Buying Silver in a Custodial Account

For those who might be a bit squeamish about having Silver in their homes, you can also purchase Silver in a custodial account. In this arrangement, your Silver is purchased, then moved into a secure facility for safe keeping. Of course, this is done at a cost, and makes most sense when you have a substantial amount of Silver that you want protected.

Fees can vary, but often range from a low of $15.00 a month all the way to a percentage of your holding’s value each month. Some pros of this include security that you most likely can’t provide at home, but at a large trust cost, and a monthly fee. Citadel offers this service and there are many other companies that also perform these services.

A spin on this idea is BullionDirect which allows you to purchase Silver, and they hold it in their facilities at no additional charge. This allows you to trade Silver as though it were as liquid as “Digital” Silver. You can take delivery at any time and they go through routine audits.

In addition, the US Internal Revenue Service allows the investment of coins in an IRA, but it must be held by a custodian. Finding a custodian can be difficult, so I would advise working with your financial planner if you choose to go this route.

Paper Silver / Digital Silver

The final, primary method for investing in Silver is purchasing Paper Silver or Digital Silver. While there are a number of companies that provide variations of this service, I’ll talk about the primary one that most are interested in: a Silver ETF. Yes, ETF- as in Exchange Traded Fund.

You can purchase Silver in the same manner that you purchase stocks, and even stay with your current broker. We aren’t going to discuss the ins-and-outs of each one, but the idea here is that you purchase a share of the ETF and this represents some percentage of the Silver they hold in storage.

The price moves up and down based on the spot price of Silver and the supply and demand of the ETF. The ETF does its best to track the spot price of Silver. Some examples include:

Silver Investing and Commodity Risks

There is substantial risks involved when investing in Silver and any other commodity. Unlike traditional stocks, there isn’t a well-run company that stands behind the price of the stock. It is a faceless commodity subject solely to the forces of supply and demand.

You can perform analysis to help you gauge what might happen to the price of Silver, but you won’t be receiving nice, uniform financial statements telling you how Silver is doing, where it intends to expand, and how it will continue enticing buyers.

Silver investing is exciting, but not for the tame at heart. If you are only used to the world of stock investing, then I highly suggest you educate yourself, and work with your financial planner before making any moves into ANY commodity. Commodity investing is extremely risky, and driven by far different reasoning.

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