How to Invest in Silver Online

For millennia, humans have used precious metals such as silver as a way to barter and exchange value. And even in today’s modern economy, many people believe that there is room for investing in silver and other precious metals as a way to diversify their overall portfolio.

Investing in silver can come in many different ways, from buying stocks or mutual funds focused on precious metals to holding the actual silver metal yourself. Depending on how you are investing in silver, it may also be considered a hedge against inflation. That said, silver is a highly volatile asset that comes with risks, as well.

4 Ways to Invest in Silver

There are a number of different ways to invest in silver, depending on what you’re looking for in your portfolio. One popular way to invest in silver is by buying physical bars or coins of silver. Another possible way to invest in silver is by investing in the stocks or funds of silver mining companies.

1. Buying Physical Silver (Bullion and Coins)

You can start investing in silver by purchasing actual, physical silver. That can take the form of bullion, which is typically silver in the shape of bars or coins without a single assigned monetary value (as with fiat currency). Bullion is instead valued by weight. For instance, you could buy a one-ounce silver coin, which isn’t valued at, say, $20, but is instead valued by the spot value of an ounce of silver. Bars, too, follow the same logic.

Bullion can be purchased at coin shops or many online retailers.

2. Silver ETFs and Mutual Funds

If buying physical silver isn’t something you’re interested in, investors can also buy shares of funds through an online brokerage that offer exposure to silver and the silver market. That can include exchange-traded funds, or silver ETFs, or various mutual funds with silver exposure. There are many such funds on the market, and investors will need to do some research to see how much exposure to silver they’re getting with a given fund; some funds invest in the broader precious metals market rather than strictly silver, for example.

3. Silver Mining Stocks

There are stocks on the market, too, that allow investors to buy shares of companies that mine silver. This, again, would require some homework on the part of investors to get a better understanding of the companies they’re investing in and how much exposure those investments could give them to the silver market.

Examples of companies that are publicly traded in the silver mining industry include Wheaton Precious Metals (WPM), Fresnillo (FNLPF), Pan American Silver (PAAS), Royal Gold (RGLD), and Coeur Mining (CDE), among others. As with funds, individuals may invest in silver stocks through online brokerages.

4. Silver Futures and Commodities

Investors can also look at derivatives, such as futures contracts, to try and gain exposure to commodities such as silver. Futures contracts are agreements to buy or sell assets in the future, at a fixed price on a predetermined date. Investors may trade futures to speculate on the potential price movements of silver in an attempt to profit from or hedge against market fluctuations, without investing directly in raw silver. Futures are high-risk investments, however, and only suitable for experienced investors.

Why Invest in Silver Now? The Value Proposition

Silver is a potentially valuable investment now for many of the same reasons it’s been valued over history. Silver has been used to make coins and jewelry for hundreds of years, which is why it’s considered a precious metal. Silver is also conductive, which means that it’s a valued industrial commodity, as well. More recently, silver has been leveraged for its use in green energy products, including solar panels and electric vehicles, as well as in some medical applications.

Silver is a type of alternative investment in that it’s different from conventional stocks, bonds, and cash equivalents. Like many alternatives, it may come with higher risk as a result of its market volatility.

As with gold and other precious metals, however, individuals have been investing in silver for centuries for both its beauty and inherent properties.

Silver vs Gold

Silver and gold have both been used as currency and jewelry since nearly the beginning of human civilization. They are both considered valuable precious metals and may be useful for portfolio diversification and as a potential inflation hedge. Deciding whether to invest in gold or invest in silver is in some ways a personal choice, and many investors decide to invest in both.

Pros of Silver Investing: Diversification and Affordability

One of the key potential advantages of investing in silver is that it may help diversify your portfolio. The rate of return for silver and other precious metals is not always correlated with that of other investments, which means that it may perform differently than other assets in a given time period. Silver is also cheaper than gold on a per-ounce basis.

Many investors also consider investing in precious metals to be an inflation hedge. Silver is a finite, tangible asset whose supply grows gradually (through mining). When the dollar weakens, the price of silver may rise, though this is not always the case. It’s commonly believed that precious metals like silver or gold may hold their value more efficiently over long periods than cash or other assets.

If you invest in actual physical silver, another advantage is that it is a hard asset; it cannot be hacked or erased. Silver and other precious metals are one of the few investments you can actually hold in your hand. Unlike other investments, your holdings in silver can also be as private as you want them to be.

Risks of Investing in Silver: Volatility and Storage

One drawback of investing in silver is that its price is considered highly volatile. It may not be a suitable investment if you are only holding for the short-term. Prices for precious metals can fluctuate wildly over the short-term, and even over the long-term, and may not provide investors with the type of appreciation they may have seen if they had invested in other assets.

Further, if you hold physical silver, you do run the risk of having it stolen. Unlike digital assets (with some exceptions), physical silver may not be recoverable if it is lost or stolen. As such, if you are buying physical silver coins or bars, you will need to find a safe and secure way to store them.

Is Silver a Good Hedge Against Inflation?

As noted, investing in precious metals is often considered an inflation hedge. Inflation is a natural phenomenon that gradually increases the cost of many goods and services over time. Silver is a hard, finite resource that has many uses — it can be used to mint coins, for instance, and be used as an actual currency, or be incorporated into other products. For that reason, it may hold its value long-term more effectively than cash or other assets.

But there’s no guarantee that silver will always be an effective inflation hedge, and it’s important to remember that it’s a highly volatile asset.

Tax Implications of Silver Investing

Investing in silver could trigger tax implications and liabilities. If you’re investing in silver-related funds (ETFs or mutual funds) or stocks, then you will generally need to pay any capital gains that arise from the sale of those shares, for one. If you’re buying physical assets, such as silver coins or bullion, you may also owe capital gains taxes once you sell those assets.

The IRS views precious metals in different ways depending on the form they take — some could be viewed as “collectibles,” for instance, while some silver coins might not. There are also minimum reportable amounts in terms of how much silver you’ve invested in and sold, and whether it needs to be reported to the IRS for tax reasons. Depending on your return and the length of time you’ve held silver, you may owe capital gains taxes.

Recap: Should You Add Silver to Your Portfolio?

Whether you decide to invest in silver or not should come down to how silver investments may fit within your portfolio, and your broader investment strategy. There’s no right or wrong answer as to whether you should invest in silver; that will depend entirely on your own preferences and goals. With that in mind, you may want to discuss your silver investing options with a financial professional.

Remember, though, that silver investing can add another dimension to your portfolio through alternative investments, but also introduce additional or separate types of risk.

The Takeaway

Investing in silver offers investors a way to add an alternative asset to their portfolio, which may help them diversify, and hedge against inflation. There are many ways to invest in silver, including investing in silver mining company stocks and silver ETFs online, or buying physical silver like coins or silver bullion.

But investing in silver has its risks, and investing in precious metals typically means investors are okay with adding a relatively volatile asset to their portfolios. As always, if you have questions, it may be a good idea to speak with a financial professional.

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FAQ

Does owning silver diversify your portfolio?

Depending on the composition of your investment portfolio, owning silver may diversify your portfolio. Silver and other precious metals are often considered an inflation hedge, meaning that their price tends to have an inverse correlation to the value of the dollar. They also tend to hold their value over a long time horizon, though they can be highly volatile. The rate of return on investing in silver and other precious metals is also not often correlated with returns of other types of investments, like the stock market or real estate.

Will the price of silver always go up?

Like all investments, there is no guarantee that the price of silver will always go up. The price of silver can fluctuate wildly, which means that depending on when you buy and/or sell, you may lose money. In fact, precious metals, traditionally, are very volatile investments.

What are some alternative metals to silver?

Probably the most popular alternative precious metal to silver is gold. Like silver, gold has been used in currency and jewelry for most of the length of human civilization. Other options for investing in precious metals if you’d rather not own gold or silver are platinum or titanium.

How is physical silver taxed?

Physical silver, such as bars or coins, can generate capital gains taxes. That is, you would trigger a tax liability once you sell your holdings, and what you owe in taxes is dependent on how long you had owned the assets, and the size of your return, assuming it was positive.

What is the gold-to-silver ratio?

The gold-to-silver ratio is the amount of silver, in ounces, required to buy an ounce of gold. Gold is more valuable than silver, so more silver is required to trade one ounce for one ounce. The ratio is derived by dividing the current price of gold by the current price of silver.

Is it better to buy silver coins or bars?

Whether you choose to buy silver coins or bars will depend on your preference, and how you plan to secure each. They’re both generally valued as bullion, or by their respective weight and silver value, so there may not be much of a difference in terms of buying one or the other.

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