Investing in Silver

When it comes to investing in silver there are a number of options to choose from. Here’s how to invest in silver.

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In the past few years, investment interest in silver has increased. From 2009 to now (mid-2011), the price of silver has tripled. If you’re thinking about investing in silver, here are some things you need to know.

Investing in a precious metal like silver is different from investing in stocks and even different from investing in other commodities. When you invest in stocks, you own a piece of a company. You try to predict stock price movement based on current company performance. Of course, nothing is guaranteed. It’s not as easy to guess how the price of silver will move in the future because it’s price is based on factors that are hard to control or predict, e.g. inflation, the value of the dollar, and political instability.

We do know that silver – and gold investing – tends to do well when the dollar is flat and when there is economic downturn. Some experts think silver could be experiencing a bubble right now and eventually, there will be a bust, as there always is with bubbles. There’s a strategy for investing in silver even when you think a bust is looming and that strategy is to sell short in hopes the price will drop. However, if silver prices rise, you risk losing money on the short sale.

Investing in Silver Coins and Bars

Another way to invest in silver is to buy actual silver coins or bars. Before you purchase, always look for the spot price of silver, which is the current price for an ounce of silver. Brokers and sellers charge a premium for silver and knowing the spot price helps you get the best deal. When the premium is far above the spot price, the value of silver must increase more before you can make a profit. Some silver coin manufacturers include Austrian Silver Philharmonic, American Silver Eagle, and Canadian Silver.

Maple. You can purchase from Kitco.com, CaminoCompany.com, Apmex.com, and GainesvilleCoins.com.

Invest in an Exchange Traded Fund

If you don’t want to buy the silver itself, you can invest in silver by purchasing shares of Exchange Traded Funds (ETFs) that are based on the current price of silver. iShares Silver Trust (SLV), ETFS Physical Silver Shares (SIVR), and Sprott Physical Silver Trust (PSLV) are a few ETFs to consider. The benefit of an ETF is that you can easily buy and sell shares through your brokerage account. Of course, there are brokerage fees and expense ratios to be considered.

Purchasing silver certificates lets you own silver without actually having possession of the silver itself. Perth Mint Certificates (PerthMint.com.au) issues certificates for allocated and unallocated silver. Allocated silver is placed in a vault with your account number and requires you to pay storage fees. Unallocated silver is in a mass storage vault with silver owned by other people. You must spend a minimum of $10,000 for your initial purchase and $5,000 for each subsequent purchase.

The drawback of paper certificates is that you don’t actually control the silver that you purchased so there’s a risk of fraud from the other party. When you purchase silver certificates always deal with a reputable company.

Invest in a Silver Mining Company

Instead of investing in the silver itself or a fund based on the price of silver, you can invest in the companies that mine silver. When you invest in a mining company, consider it as you would any other company. Investigate that company’s quality of management, how much stake management has in the company, political risks happening in the country where that mining happens, and how close the companies are to production (exploring silver vs. producing silver). Some of the largest international silver producers include Penoles (PE&OLES), BHP Billiton (BHP and BBL), and Rio Tinto (RIO).