What to Know About Investing in Silver

By Trevor Onions , last updated September 8, 2011

If you've been thinking about investing in silver, there are a few things you need to know first.

Fundamentals of Silver Investing

Like gold, silver is prized for its historic merits and recent growth. Before paper and digital currencies were in vogue, silver was a major metal of choice for governments and consumers as a daily store of value (hence the past popularity of the silver dollar). Today, silver is most coveted as an industrial metal and investment commodity, though niche groups continue to promote its usage as currency. Silver has followed gold, platinum, and palladium on a steady upward trend since the beginning of a powerful bear market in 2008.

The real question many investors are asking themselves is if silver's run will last, and how high it may go. As with any market predictions, such questions are difficult to answer, though there a few critical indications about silver's favorability as both a short- and long-term investment. High unemployment, sovereign debt issues, and sluggish innovation across the world's most developed economies continue to prop up precious metals as safe havens for investors to park their cash. More importantly, banks, wealthy individuals, and nations are buying up vast quantities of silver and gold. Over the long run, demand for silver in manufacturing powerhouses like China is expected to grow, and some prospectors think that silver veins are scarcer than widely believed.

Despite these promising signs, it's worth noting the risks posed by silver too. Over the last few decades, silver enjoyed similar bursts of enormous gains, followed by steep declines. This marks it as a volatile commodity, and it should be treated as such. Although silver may offer steady growth and protection from inflation going forward, prudent investors are wise to avoid putting all their money in silver. Instead, treat it as a small portion of your portfolio to mitigate its risks and increase the chances of seeing rewards.

How to Invest in Silver

Unlike other commodities, silver gives investors many ways to buy and sell it. The most liquid, easy, and familiar methods are accessible through a good mutual fund or broker. Silver driven Exchange Traded Funds (ETF’s) are an excellent way to buy the metal and retain good diversification among silver classes. Mining stocks, silver certificates, and shares in silver related industries are all bundled into the average ETF.

Physical silver has gained popularity as well. Antique coins and bullion are available online, or from physical retailers, in limited cases. Holding silver in your personal vault offers the surest and cheapest way to acquire it, but be mindful of fees and safety requirements.

Silver remains a moderately unconventional asset to own in great quantities, but this is changing. By putting some of your cash into this commodity, you stand to enjoy silver's benefits, and possibly surpass fellow investors as it continues its forward march.

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