People have been trading silver since 600 BC and they are still investing in this precious metal today. There are many reasons why people still invest in silver. We will look at the major ones.
Diversification of investment portfolio
Savvy investors know how true the adage: “don’t put all your eggs in one basket” is. It means that it isn’t safe or smart to put all your money into one asset. Silver is an asset you can include in your investment portfolio. How much silver you invest in compared to other investments like stocks bonds or gold will depend on how strongly you feel about the metal.
Silver as a hedge
Silver is a rare, precious metal. Its supply is not infinite which makes it a great hedge against inflation. Fiat currency gets printed every year and this causes inflation and makes the dollar lose its value. On average, the inflation rate hovers around 1-3%. This might seem small but it adds up over time. On the other hand, silver can’t just be produced, its limited supply means there is less of it in circulation. When the demand outweighs supply, the price of any asset will go up and this is also true for silver. However, unlike fiat currency, which is used for only one thing, silver has many other uses in various industries like the automobile industry, in medicine, in power generation and transmission and so many others. This usefulness makes silver a most sought-after metal and a great store of wealth.
The question silver investors would ask is: “should I buy silver bullion bars or bullion coins?” Let’s look at these options individually so you can decide the one that is best for you.
- Silver bullion bars have lower premiums than bullion coins which means they will be cheaper to buy.
- Silver bars are stackable and therefore easier to store.
- Unlike silver coins, silver bars aren’t easy to lose or misplace.
- When you buy silver bullion bars you pay less of a premium and get them at a price that is close to the spot price. The premium will depend on the size of the bar and the value of your order. Usually, the premium is less for big orders and bigger bars. You can expect to pay at least a 5% premium for large silver bars.
The silver might be a much sought-after but when given a choice between bars and coins, most investors gravitate toward silver coins.
What’s the allure of silver coins?
Silver bullion coins are valued for the amount of silver contained in them, but some coins have collectible value. You can buy small amounts of coins or larger amounts – it depends on what you can afford. You can spend as little as a couple of dollars for an ounce of silver and stack your coin collection regularly. The biggest disadvantage with silver coins is the large premiums The American Eagle Silver coins are the most popular silver bullion coins. When buying these you may pay $2-3 over the spot or a premium of 15 to 25% premiums. The high premium means that you will get less silver for the bucks you pay. However, the premium goes down when you buy in bulk.