After you and your financial advisor have decided that buying silver is a good strategy for your portfolio, you should choose the silver investment vehicle that is in accord with your own preferences and investment philosophy. As with any investment, you should judge the merits of your silver investments as they relate to your investment needs. To help you, we have included the following digest of some of the advantages and disadvantages of particular silver investments.
Exchange – Traded Funds (ETFs) Advantages: For investors who seek exposure to the physical silver market, but have no desire to possess the metal or pay direct insurance, assay, and storage costs, ETFs offer an alternative. They have major exchange listings and trade like equities. Investors can buy shares in a trust that owns the silver bullion. Disadvantages: Because the ETFs are created to reflect the price of the silver, the market price can be as unpredictable as the price of silver on any given trading day. Silver Bullion
Bars of Approved Refiners Advantages: Usually the least expensive Convertible into cash…Internationally negotiable…Price is widely quoted. Disadvantages: Must be stored securely…Possible need for assay at time of sale…Yields no interest.
Silver Mining Stocks Advantages: Offers capital appreciation opportunities…Dependent on the company’s management and operating strength…May yield a dividend. Disadvantages: May require greater investment than small physical bullion purchases…Requires knowledge of equity market.
Silver Mutual Funds Advantages: Many mutual funds offer investment programs in silver and precious metals…Diversified holdings among dozens of companies. Disadvantages: May require greater investment than small physical bullion purchases…Requires knowledge of equity market. Silver Bullion Coins Advantages: Relatively inexpensive, some less than US$10.00…Small and easy to store…Instant convertibility into cash…Easy to transport…Internationally negotiable…Prices quoted widely. Disadvantages: Must be stored securely…Yields no interest…Premium over bullion bar prices. Silver Medallions Advantages: Prices can range from least expensive to most expensive…Small and easy to store…Easy to transport. Disadvantages: Similar to coins, but not always easily convertible to cash unless they bear the mark of a reputable refiner.
Silver Certificates or Storage Accounts Advantages: High liquidity…But at competitive prices…No storage risk…No sales tax…Prices widely quoted…Invest by dollar amount. Disadvantages: Several days’ delay in delivery of silver…Silver not in physical possession of owner. Silver Accumulation Plans Advantages: Invest as little as $100…Discounted commission rates…Highly liquid…No sales tax…Offers dollar cost averaging…No storage fees. Disadvantages: Silver not in physical possession of owner although some firms will deliver the metal if requested.
Silver Futures Contracts Advantages: Speculative appeal…Leverage reduces capital tie-up…Liquidity…Contracts widely quoted…No storage risk. Disadvantages: Many trading limitations…High risk factors…Unlimited loss potential…Requires market expertise. Silver Options Advantages: Speculative appeal…Leverage reduces capital tie-up…No storage risk…clearly defined risk. Disadvantages: Trading limitations…Highest risk…Less negotiable and less liquid…Investor must be willing to sustain the loss of their entire investment in a commodity option…High degree of knowledge required.