When it comes to investing in precious metals, gold gets all the attention. But once in a while, this attention turns to silver. And becomes of its importance in the industrial market, it tends to become more valuable than its pretty yellow sister, even if it is just for a short while.
For instance, in February, traders who trade on the forum WallStreetBets, which is on Reddit, caused the price of the metal to skyrocket. The price got to a point it has never reached in the last 8 years.
You can click https://markets.businessinsider.com/news/stocks/silver-miners-stocks-reddit-first-majestic-wheaton-precious-pan-american-2021-2-1030028701 to read more about the price hike.
However, apart from the deliberate manipulation of the price, should you invest in it?
You can. This is because it is usually cheaper than gold. You don’t have to spend so much buying it as you would gold. And it is a good option when you want to counterbalance or diversify your investment portfolio.
But it is also important to bear in mind that investing in the metal also has its risks and unique factors to consider.
A Viable Investment Option
Today, it is clear that bonds and stocks are not the only investment options available. In fact, trading in everyday commodities have been the norm for thousands of years – stocks and bonds are the relatively new players in the field.
Besides, the prices of tangible commodities tend to flow in the other direction, away from bonds and stocks. So if the prices of your stocks in the market fall, the prices of commodities rise.
Therefore, when there is a recession or economic upheaval in a country, investors tend to turn to commodities such as silver.
The precious metal also plays a good role in acting as a hedge for inflation. Because it is an asset that can be seen and felt, unlike stocks and bonds, it has an essential value. It can be used for so many other things, apart from being an investment option.
The metal also holds a long term value, even when there isn’t much coming in from other investments or the interest rates drop.
As a result, investing in it is relatively safe. But its industrial value can affect how well it performs in the market.
Its industrial value includes use in making batteries, jewelry and medical equipment. It is also used in technologies that apply to making electric cars and solar energy.
The advent of these technologies will definitely increase the demand in years to come. Therefore, if you invest in it, not only are you advocating for a cleaner energy environment but you are also choosing a commodity that will keep having immense value for many years.
Click here to read up more on the investment potential of the precious metal.
Gold vs. Silver in the Investment Market
These two precious metals tend to go hand in hand. This is because apart from their color, they share some things in common.
However, these two metals have some key differences. And these differences affect their value and performance in the market.
Silver Is Harder to Store than Gold
Silver needs more storage room than gold. So even if you get more of the shiny metal with the same investment package due to price, you will spend more on transporting and storing it than you would with gold.
In addition to this, it is likely to tarnish while in storage. The same cannot be said about gold.
Silver Is Not as Liquid as Gold
You will likely have a harder time selling it than gold. This is because people know, understand and accept the latter better than the former. Therefore, there are more reputable and safe places to sell or invest gold.
Silver Costs Less than Gold
The per-ounce price of the precious metal has never crossed the $50-dollar mark in the financial market. On the other hand, gold is in the 4-figure price range and does not drop below that.
In other words, if you are looking to invest a certain amount in precious metals, you will get more silver for that amount than gold. What’s more, it is likely to earn you more profit.
Silver Is Not a Good a Hedge as Gold
Due to the fact that it is an industrial metal, it is susceptible to factors that affect manufacturers and even the economy.
It is true that gold also has industrial uses so these same factors could affect it, too. But it is more investment than industry-driven. So as a hedge against inflation or a plummeting stock market, gold does better.
How to Invest in Silver
To invest, you can buy the metal in bars and bullion coins forms. This is the clearest investment form. But with it comes the expenses of moving and storing them.
So instead of buying the metal itself, you can buy financial instruments that take its place. Some of these instruments are:
Mutual Funds. These tend to hold silver portfolios. They do this by investing in silver companies or buying the metal itself.
Silver Stocks. These are companies that mine, process or sell the metal. They may be few – because the metal is usually mined with other metals – but they exist.
You can check out on metal-res.com silver investment guide to see if investing in silver is an option you want to pursue, especially as a retirement plan.
There are a few risks involved in investing in silver. The same is true for every type of investment. Some of those risks are:
- The price can fluctuate unpredictably. This is mainly due to its industrial and investment values. So if there is a hike in the price, for example, there will be a scramble for all things silver. And because there are so many salvageable items, there will be too much supply. Consequently, the price will drop again.
- Its use in technology could shift. The metal used to be a big player in photographic film. But the digital era has reduced its importance. There is also the chance it could be replaced in its use by another metal.
- It is vulnerable to recession. Because its value is usually driven by industrial growth, it can also crash with a decline in the economy.
- There is little or no accruing interest. The best bet for getting extra from it is to sell it when the price is high.
The metal’s low profile when it comes to the investment market has kept its price low. Therefore, it is easily affordable. And the more of it you buy, the better the chances of making more during a spike in its price.
But its volatility and less liquid nature are some of the risks to keep in mind. If you can stomach it, then it is a good investment choice.