Why should I invest in silver? As you may have discovered during your brief search about this precious metal, silver has been one of the preferred options for precious metal investors for a variety of reasons. In today’s post, we take a look at some of the things that make silver a go-to option for investors, as well as some of the downsides of this asset that you also ought to know. Hopefully, by the time you are reading the conclusion of this article, you will have decided whether you should really whip out your checkbook and purchase some silver. If that sounds interesting to you, read on to discover more.
It is quite natural for every wise investor to think about whether a particular asset is a good investment for their portfolio or not. That also applies to silver, owing to the fact that it has its upsides and downsides. Pros and cons are to be expected with any type of asset, and almost everything in life. We are, however, required to weigh the good and the bad, and if the good outperforms the bad, we can always take up the option at hand. Do the pros of investing in silver outweigh the cons or is it the other way round? Hop on to the next section to find out.
The Pros of Investing in Silver
Silver has been around for many years, which gives investors a sense of confidence that this precious metal will always find its place in the present-day global economy. Besides that, there are some other top reasons behind why they opt to purchase silver for their portfolios, including:
1. Silver is a tangible asset
One of the ways in which you can invest in this precious metal is by purchasing bars or coins. For many investors, having a tangible asset provides a much-needed sense of security. It appears that having something you can hold and see may at times give a sense of ownership, and this in itself is sufficient to influence investors to set aside a portion of their wealth to purchase silver.
2. A hedge against inflation
During times of economic uncertainty, investors tend to run to assets that have the capacity to hedge their portfolios against losses. Silver is one such asset. Despite being volatile over the short-term horizons, this precious metal is capable of beating inflation over the long-term investment horizons.
A significant number of people think that diversification is simply about having several different stocks in their portfolios. Seasoned investors will, however, tell you that diversification also involves holding assets in different classes, from different industries. Generally, assets that are correlated tend to experience price movements in the same direction. However, with uncorrelated assets, the price movements tend to follow different directions.
During times of economic crisis, paper assets tend to be severely affected by market conditions. This means that investors who have taken shelter under different stocks, ETFs, funds, and other paper assets, may end up having a rough time.
The 2008 financial crisis is a great example of how bad things can get if an investor fails to diversify their portfolio in the right way. The good news is that adding uncorrelated assets such as silver to one’s portfolio can have significant diversification benefits.
4. Safe haven
As already mentioned, investors tend to look for “safety” during times of economic turmoil. When there is political and economic uncertainty, paper assets take a back seat to assets such as silver and gold. While both gold and silver tend to be appealing to most investors, not many of them have sufficient money to purchase gold in large quantities, hence silver gets some attention when the cost of investment is put into consideration. At the end of the day, the two metals end up playing the same role ( there may be some unique differences, however).
When many people are beginning their precious metal investment journey, they often have gold in mind and no wonder. Gold is the dominant asset in this industry, but as highlighted above, not everyone can afford to purchase a significant amount of gold to add to their portfolio ( an amount that will make sense from a profitability perspective). When the investors discover that they cannot afford the yellow metal, they often start looking for affordable alternatives. Silver tops the list of the most affordable precious metals to invest in. With $100, you can purchase enough silver to begin your journey as a silver investor.
6. Higher returns than gold
Silver has often been referred to as “gold on steroids”. This is due to the fact that while gold and silver prices move in tandem, silver generally outperforms gold, moreso during bull markets. If you are solely looking to achieve great profitability during a bull market, then you may have a better shot at it if you add some silver to your portfolio. “May” is the keyword to consider, since assets tend to defy all historical trends whenever there is a combination of unique market factors.
The risks of investing in silver
Before you invest a single penny in this asset, you should know that it also has risks that can potentially damage your portfolio. You should understand such risks so that you can decide whether you have what it takes to counter them in case you are exposed to them. Here are some of the most outstanding ones:
While silver can be a great asset to diversify your portfolio and hedge against potential losses, it is also subject to market forces such as demand and supply, which can make its prices quite unpredictable. Its prices are quite volatile in nature and have been seen to rise and fall faster than those of gold.
2. Higher premiums on silver products
When you try to purchase any bullion product e.g. American Silver Eagle Coin, you will quickly come to the realization that the price of such products is generally higher than the spot price of silver owing to the premiums put in place by the silver dealers. If the demand for silver skyrockets, the premiums can go up pretty fast, making the idea of purchasing physical silver bullion less attractive.
3. Weak return on investment
Although silver has its many benefits, in the absence of events that trigger sudden price rises, you may end up not getting an impressive return on investment. The good thing, however, is that the global unrest has created a perfect environment for silver investors to reap gradually as the years go by.
Should I, therefore, invest in silver?
The answer to this question boils down to personal choice. As you have seen, investing in silver has its unique upsides and downsides. No asset is guaranteed to deliver on the promised benefits, but investors still go-ahead to make their bets. Unlike other assets, silver is quite affordable, and you can purchase a small quantity of this white metal just to see what its price movements are like in the short term and in the long term.
Frequently Asked Questions on “Why you should invest in Silver?”
1. Is now a good time to invest in silver?
As with any asset, the choice of the time to make an investment is dependent on the investor’s objectives. If you are currently thinking about how to diversify or hedge your portfolio against different market conditions, however, silver is worth considering, and you may need to add it to your portfolio now.
2. Is silver a good long-term investment?
Historically speaking, this asset has performed quite well over the long-term horizon. Past results, however, do not guarantee future performance, so I give a clear go-ahead for one to purchase silver as part of their long-term strategy.
3. Is silver better than gold?
Gold and silver have their unique pros and cons. For one to compare the two assets, they need to define the parameters of comparison, since gold performs better than silver in some areas, and silver outshines gold in others.
4. Should I buy silver bars or silver stocks?
This entirely depends on your investment objectives. Generally, however, if you are looking for an asset that will give you a sense of security and ownership, or one that can offer protection against the state of the economy, then physical silver will be the go-to option. If you can stomach greater risk as you attempt to achieve profitability, then you may shop around for silver stocks (mining stocks).
That will be all for today’s article: why should I invest in silver? I hope you found it informative, and that it will inform your investment decisions. If you have more questions with regards to this article, be sure to drop them in the comments section, and I’ll get back to you ASAP!
I wish you well,
Eric, Investor and Team Member at Gold Retired!