How To Buy Silver
| Does this mean that silver will go to $150 before this bull market is over? I have no idea. But if the idea of $150 silver seems entirely unbelievable to you, then let me share two ideas that might make you a better investor. First, the future is inherently unbelievable, so don't rule anything out. Second, history is the best teacher, especially where investments are concerned. If silver made an inflation-adjusted high of $150 during the last bull market, then what makes it an improbable target this time around? If you'd like to read a brief history of the last precious metals bull market, then click here. Your Silver Investment Options There are many ways to buy silver. Let me take you through the basics of each. (1) Buying physical silver - The most direct way to acquire silver is to purchase physical metal from a dealer. Dealers can be found online or in your local phone book (under Coin Dealers). By buying locally you can take instant delivery and avoid shipping costs. Online dealers often have lower prices and wider selections, but shipping costs can be high. Be sure to shop around for the best deals. My favorite online dealer is www.APMEX.com. As always, do your own due diligence when buying online, and beware of scams! Here are some common forms in which you can buy silver: (2) Buying paper silver (Unallocated Pools & Certificates) - The easiest kind of silver to buy is what I call "paper silver". You purchase paper silver when you buy silver from a company but do not (yet) take physical delivery. Often there are no storage fees. You can buy an unallocated share of a company's silver reserves ("pooled silver") or you can purchase a certificate stating that the issuing company owes you a certain amount of silver. You can often take physical delivery at will (after paying minting and shipping fees), or you can simply sell your pooled silver or certificates back to the company. The greatest advantage of buying paper silver is convenience. However, there are several disadvantages which you ought to consider:
You're placing an inordinate amount of confid- ence in a company when you buy paper silver. It brings to mind the plot of The Emperor's New Clothes, a tale in which an emperor hires two swindlers to make him the finest set of clothes. The crooks convince the emperor that his new clothes are invisible to some, and they then pretend to dress him. The gullible emperor then proudly displays his new outfit to the public by parading through town in his underwear. So they pretend to sell it, and you pretend to own it. Let me be clear - I'm not suggesting that all companies that offer pooled silver or certificates are trying to swindle you. Just be careful when you pay for something and get nothing but a promise in return. If you feel that holding silver bullion is just not an option for you, then consider buying allocated silver from a reputable silver dealer. Allocated silver is different from pooled silver because specific bars and coins are set aside for you. Another option might be www.GoldMoney.com. GoldMoney offers unallocated gold and silver and claims to have overcome the aforementioned disadvantages. As always, do your own research before investing with any company. (3) Buying silver stocks - You can take advantage of silver's upside potential using your stock trading account! Most opportunities lie in silver exploration and mining companies. The larger publicly-traded silver companies include Pan American Silver (PAAS), Silver Standard Resources (SSRI), Hecla Mining (HL), and Silver Wheaton (SLW). Another commonly-traded stock is the iShares Silver Trust ETF (SLV). This ETF (Exchange Traded Fund) trades like a stock, but each share represents partial ownership of a large quantity of physical silver stored by the company. Your stock broker should be able to help you research silver companies and identify suitable investments. It should be noted that silver companies do not always rise and fall with the price of physical silver. Sometimes silver companies outperform the metal. Sometimes the companies lag the metal. Also, some silver companies will perform better than others. Since your investment's performance will depend largely on the operations of the company rather than just the price of silver, investing in silver stocks may carry more risk than investing in the metal. Points to Ponder... - Store your silver in a safe, secure place. Safety deposit boxes work for smaller amounts. - Precious metals are measured in troy ounces. 1 troy ounce equals about 1.1 ounces. - Silver is taxed as a collectible (28% of gains) while stocks may be taxed at lower levels. - Unless you're a seasoned professional, avoid buying options, futures, and on margin. - Professionals buy silver when prices dip. Novices chase high prices. Don't be a novice. If you'd like to learn more about gold, silver, and other opportunities, click here to sign up for our free email newsletter. Also, additional articles on gold and silver can be found on our Resources page. Happy investing! ****************************************** To sign up for our FREE EMAIL NEWSLETTER, visit our main page at http://www.HomemadeInvestors.com. Disclaimer: Homemade Investors is published by Homemade Investors LLC. The information contained in this article does not constitute personal investment advice and is not designed to meet the personal financial needs of any individual. Investors should seek advice from a qualified investment advisor before entering into any transaction. The information contained in this article is deemed reliable but is not guaranteed. The information and opinions contained in this article are subject to change without notice, and there is no obligation to update such. To republish this article, visit http://www.HomemadeInvestors.com/reprint for guidelines. © 2008 Homemade Investors LLC. All rights reserved. |
by Daniel R., Homemade Investors
Monday, June 2nd, 2008
Monday, June 2nd, 2008
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Homemade Investors
| A Unique Opportunity You may have heard by now that silver is a unique opportunity among investments. Although the purpose of this article is not to extol the virtues of silver, let me give you a few reasons why I like the metal:
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| Coins - These are minted by governments and have face values. An advantage in buying coins over other forms of silver is that minted coins are widely recognized and may be easier to sell. Coins may even develop numismatic (coin collecting) value. |
| The main disadvantage in buying coins is that dealers often charge higher commissions than for other forms of silver. By shopping around, however, you can often find coins selling at bargain prices. WARNING: Some dealers may try to sell you expensive coins by convincing you that rare coins appreciate faster than silver itself. It's likely that they're just trying to sell you a more expensive coin. |
| Bars - Bars are a relatively inexpensive way to buy silver. Bars come in various sizes (1, 10, 100, and 1,000 ounce bars are common). If you have little to invest, you might favor the smaller sizes. If you plan on buying a lot, then consider larger bars. |
| Circulated U.S. Coins ("Junk Silver") - Prior to 1965, most U.S. coins (dimes, quarters, half-dollars, etc) contained either 40% or 90% silver. Although most of these coins have been taken out of circulation, they are regularly sold by the larger coin dealers, often in rolls or bags. Junk silver is the cheapest form of silver you can buy. The coins are easily recognized because the minting year stamped on them proves their silver content. The main downside in buying junk silver is that the silver must be refined to be extracted, so dealers will pay you less for it than for pure silver. |
| Silver bars should always have the weight and purity (99.9% is best) stamped on them. Larger bars are sometimes easier to sell back to dealers if they have a serial number and bear the stamp of a reputable mint such as A-mark, Engelhard, or Johnson Matthey. These features are less important on smaller bars (say 1-10 ounces). As with all silver, try to buy bars as close to the current per-ounce (also called "spot") price of silver as possible. |
| Rounds - These are 1-ounce silver coins that are minted privately. As such, they are not true coins since they have no face value and are not government issued. Like bars, their values are determined entirely by their silver content. Rounds should always have the weight and purity (99.9% or more) stamped on them. Other factors, such as appearance and condition, are relatively unimportant. Rounds are cheap alternatives to coins and are ideal for investors who plan on buying a little at a time. |
