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Investing in Silver

There are a number of ways to invest in silver, from buying the actual precious metal to investing in a fund that buys it for you. Commodities like silver are a favorite investment of those who don’t want to deal with the volatility and risk of the stock market, but want more potential return than bonds and other low-risk options can give you. If you’re interested in investing in silver, consider getting help in the form of a financial advisor who will walk you through all your options and make sure you make the best choices for you and your family.

Investing in Silver: The Basics

Folks who invest in silver often say that doing so lets them hedge against the risk that their other investments might depreciate – and against the risk of catastrophic events. According to these investors, silver’s intrinsic value and history of being used as a currency mean that even if the dollar’s value drops, folks who hold silver will come out on top. Much of the appeal of commodities like silver stems from the fact that they give investors something to latch on to. They’re not just numbers on a screen.

Those who want to invest in silver have a few options. You can buy the physical commodity and figure out a way to store silver bullion securely. You can also invest in a silver-backed Exchange Traded Fund (ETF) that trades on the market and offers a higher degree of liquidity. You can buy silver futures contracts and either go long on silver (betting that its price will increase) or short silver (betting that its price will decrease). Alternatively, you can buy stock in a silver mining company. Keep in mind, though, that when you invest in a silver mining company you’re taking on risks associated with the management of the company, not just the risk that the price of silver could fall.

Investing in Silver vs. Investing in Gold 

investing in silver

With the same amount of money, you can buy a lot more silver than gold. If you don’t have a lot of extra money and you have your heart set on investing in a precious metal, silver may be a better place to start. But remember that you don’t have to invest in metals at all. Their prices are volatile and they’re not a particularly reliable way to grow your savings.

Skittish investors tend to flock to both gold and silver when an economic crisis has already set in, the stock market is down and metal prices are up. If you jump on this bandwagon, you’re committing the classic mistake of “buying high,” investing in something when its price is already at or near peak. Conventional wisdom states that investors should buy low and sell high. This means overcoming your natural instinct to sell off stocks in a crisis and retreat to commodities like gold and silver.

Investing in Silver: The Risks

People who advocate investing in precious metals will tell you that it’s safe. What they won’t say, however, is that prices of metals, including silver, can be volatile. Plus, there are often high fees and commission expenses associated with investing in individual silver stocks. The average investor can do perfectly well just buying and holding some low-cost index funds. If your investing portfolio is under-diversified, with too much money in silver, you’re a) vulnerable to silver price fluctuations and b) missing out on potential stock market gains.

Bottom Line

investing in silver

At the extreme end of the silver investor spectrum are those folks who fear that society might break down someday. Then, they say, silver investors will be able to take their silver bullion out of the vault and use it to buy goods and services. If owning some silver will make you feel better about the future, who are we to stop you? But for the bulk of your investments, you’re probably better off sticking with a more conventional option, like the low-cost index funds.

Tips for Investing

  • A financial advisor can help you invest in silver or with any other investment questions you have. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.
  • You don’t want to only invest in silver. Instead, you should think abotu a strategic assset allocation model that leaves you with plenty of different investments in case one doesn’t work out. Use SmartAsset’s free asset allocation calculator to get a sense of what your portfolio should look like.
  • If you know a general rate of return, you can get a sense of what an investment will look like in the future. Use SmartAsset’s investment calculator to see exactly how much money you might have in the future.

Photo credit: © iStock/rasslava, © iStock/adventtr, © iStock/TooTH_PIK

Amelia Josephson Amelia Josephson is a writer passionate about covering financial literacy topics. Her areas of expertise include retirement and home buying. Amelia's work has appeared across the web, including on AOL, CBS News and The Simple Dollar. She holds degrees from Columbia and Oxford. Originally from Alaska, Amelia now calls Brooklyn home.
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