The stock market has been extremely volatile in 2020, falling during the winter months, but then convincingly rebounded since March. However, an investment that has increased considerably so far this year is silver. In the past few weeks, silver has jumped to its best levels in years. Many investors see even more advantages for the low-priced precious metal.
There are three different ways to invest in silver. Not all of them share the same investment characteristics, and although they all tend to benefit when silver prices rise, the specific ways in which each thrives on raising silver prices differ greatly. Below, we’ll take a look at four different silver investments and offer some thoughts on why some might make more sense to you than others.
1. Silver bars, coins, and other bullion investments.
For some investors, there is no alternative to owning real physical silver. There are many online coin and bullion dealers who will sell you silver in amounts ranging from a single ounce to 1,000 ounce bullion. You can also visit local coin shops in person, as many of them also offer ways to buy and sell silver. There are many different silver coins in various weights, as well as bars of various sizes.
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Owning physical silver ensures that you will directly participate in the movements of the silver market. However, you will be responsible for the shipping costs to obtain the silver and will have to take care of storing it safely. Also, most dealers have a fairly wide gap between the price at which they will sell you silver and the price they will pay you to buy it again. Therefore, this method is best for those who expect to keep their silver for long periods of time.
2. Silver futures contracts
You can also invest in silver without having to take physical possession of any real metal. Silver futures contracts give you the right to receive delivery on a specific date in the future at a price that tends to fluctuate with the price of silver. If silver prices increase, the value of your futures contract will generally increase along with it. If you do not want to receive the delivery, you only need to sell the contract before its expiration date.
Silver futures are generally fairly closely traded with the spot price of silver bullion, but there is still some risk of irregularities in the futures market that can create disparities between spot prices and futures prices. You’ll also need to speak to your broker to see if he has the ability to trade futures contracts on your account. Otherwise, you will need to take steps to add the futures trade to your account or obtain a separate account with another broker. Furthermore, the complexities of futures contracts can be complicated, leaving many investors preferring other options.
3. Silver ETF
The exchange-traded fund market also supplies silver investors with funds that track the price of the white metal. iShares Silver (NYSEMKT: SLV) It has silver bars, and each share corresponds to approximately 0.93 ounces of silver. Except for the 0.50% annual expense ratio, the ETF has done a good job of tracking long-term movements in the silver market.
ETFs allow you to buy and sell stocks every time the market is open. They are generally also available without commissions, saving you the margins that your local coin dealer will charge. However, some investors don’t like silver ETFs that much, because you don’t have the legal right to demand the actual silver bullion from the fund.
4. Silver mining stocks
A lot of companies mine silver. When silver becomes more expensive, your earnings tend to increase. Most silver miners are actually leveraged plays on silver prices, because fixed costs make the impact on profits greater than the increase in the price of silver. As a basic example, if a company has costs of $ 10 per ounce to mine silver and the price rises from $ 15 to $ 20, then the miner’s earnings will double from $ 5 per ounce to $ 10. That can create huge moves from shares, despite the fact that the price of silver rose only 33%.
However, the link between any miner and the silver market is not perfect, as some specific company problems may arise. For example, if a mining company has an accident at one of its mines, it may have to close the mine and stop production. That will drive mining stocks down even if silver prices soar.
Investors can buy individual mining stocks. Alternatively you can turn to ETFs like GlobalX Silver Miners (NYSEMKT: SIL) for diversified exposure.
5. Silver Transmission Companies
There is another set of companies with exposure to silver. Streaming companies are not miners, but they work with miners to provide financing for mining projects. In return, they will obtain the right to buy part or all of the silver production from those projects, often at a fixed price that is well below the current market price.
Most transmission companies, including Wheaton Precious Metals (NYSE: WPM) and Franco-Nevada (NYSE: FNV), enter into contracts with precious metal miners of all kinds. With exposure to gold and platinum group metals, as well as silver, it can be difficult to find transmission companies for pure silver. However, gold and silver often move in tandem, so some investors are also comfortable with exposure to gold at a transmission company.
Hello ho silver
If you think silver has more room to run higher, then these five investments deserve a closer look. No matter which one you choose, you will be in a position to make a profit if the silver market remains as active as it has been lately.
