With the stock markets showing increased volatility and uncertainty, some investors are turning to different kinds of assets as they look for new opportunities.
Alternative investment classes are often used during bear markets to keep money out of volatile markets without losing ground to inflation. They include assets like commodities, real estate, and other investments that have little correlation to stock markets. One of those assets is silver bullion, a precious metal that provides some unique qualities as an investment vehicle.
Precious metals have a history of garnering investment interest when there is little growth in the stock market, as well as during periods of high inflation. If you haven’t invested in silver before, these tips will help you buy, sell, and get the best possible return on bullion.
What Kind of Silver Should You Buy?
You have lots of options if you’re going to get into silver investing, and it’s not always clear which will make the best investment.
Unless you have an interest as a collector, you can leave out jewellery, collectibles, and junk silver. Junk silver includes all circulation currency that contains real silver, which both Canada and the United States minted until the 1960s. It can be harder to find a buyer who will pay premium prices for these and make a better return.
Once you remove collectibles and junk coins from the picture, there are still several investment-grade assets to consider:
- Silver coins or bars are highly pure forms of physical silver, usually 99.9% pure or higher.
- Silver ETFs (Exchange-Traded Funds) allow you to invest in a fund that itself owns bullion and futures, allowing you to invest with one step removed and not have to worry about physical storage or insurance.
- Silver mining company stocks are another good way to buy silver on paper, but performance may have more to do with the management and efficiency of the company than the price of silver itself.
If you want to own physical silver, fine silver coins or bars are the safest bet. Silver coins are made by national mints around the world. The most widely recognized and tradable coins include the American Silver Eagle, the Canadian Silver Maple Leaf, the Chinese Silver Panda, the Silver Britannia, the Austrian Silver Philharmonic, and others. You can also find a wide variety of commemorative and collectible coins made from pure silver bullion.
How Much Silver Should You Own?
When you’re buying bullion, there are two main factors that go into the price:
- The spot price of silver, determined by trading on global markets.
- Premiums charged by the dealer, which cover the costs of manufacturing, shipping, and storing the coin.
Bullion dealers often offer discounted premiums for investors who buy in higher volumes. It’s one of the advantages of buying silver rather than gold. Thanks to silver’s significantly lower price per ounce, it’s much more affordable to buy silver in larger quantities if you’re an everyday retail investor.
However, that begs the question: is there such a thing as owning too much bullion? One of the reasons investors buy silver is to diversify their portfolios. They already own stocks and bonds, both mainstream assets that tend to make up most investment portfolios.
Many financial advisors suggest that about 5-10% of your portfolio should be invested in gold or silver, though that number may go as high as 15% during times of recession or high inflation. More than that and your portfolio is over-exposed to the risk of a price decline in bullion, as well as missing out on potential price growth in stock markets.
Silver provides balance to a portfolio made up of a variety of assets.
How to Sell Your Silver Coins
Not only do you need to know what to buy, but also how to sell silver coins for the best possible return. Fortunately, if you purchase bullion-grade coins or bars, you’ve set yourself up for success when it comes time to sell.
One feature to look for in an investment is its liquidity. Generally speaking, precious metals are not considered the most liquid assets compared to equities, but silver has more liquidity than an asset like real estate.
It is not hard to get cash on the spot for silver bullion, and if you take it to the right place, you can get a great price for it. Take silver coins and bars to a bullion dealer, especially if they post their rates publicly. You can also get quotes from several dealers. Even if you need the money quickly, you should be able to cash in on the day if you can take your bullion in for an in-person evaluation.
Anyone hunting for investments outside of the stock market should find that investing in silver coins and bars is not only an attractive alternative during times of stock volatility but that they’re also very easy to buy and sell.