Our writers and editors used an internal natural language generation platform to assist with parts of this article, allowing them to focus on adding information that’s particularly useful. The article was reviewed, fact-checked and edited by our editorial staff before publication.
Precious metals such as silver have long been an alternative to traditional investments such as stocks and bonds. When times get tough or the economy faces severe inflation, some investors turn to silver to hedge their bets or invest more defensively. Silver prices peaked in March 2023 following the collapse of Silicon Valley Bank, as concerns arose about the stability of the financial system.
Investors love silver for many reasons. Many see it as a store of value in uncertain times, while others see silver and other precious metals such as gold as protection against inflation. For the latter group, investing in silver is a way to ensure they have a currency that cannot be inflated by money printing or potentially destructive Federal Reserve policies.
Wondering how you can buy silver? There are several ways to invest in the metal, from owning it outright to owning shares in companies that produce it. Here are five of the best ways to invest in silver.
How to invest in silver: 5 popular ways
Each of the ways to invest in silver comes with its own risks and rewards.
1. Coins or precious metal
Owning physical silver, in the form of coins or bullion, is a psychologically and emotionally satisfying way to invest in silver. You own it and can use it if necessary. And in some cases, it’s even relatively easy to access. For example, U.S. coins made before 1964 contain about 90 percent silver, and you can buy them for the value of their silver content.
If the price of silver rises, you can make a profit on silver coins and bullion, but that’s the only way you can make money here because the physical commodity doesn’t produce cash flow, unlike a quality business.
You can buy silver through local dealers and pawn shops or online dealers such as APMEX or JM Bullion. At more specialized dealers you can buy whole bars instead of just coins.
Risks: It can be easy to overpay for physical silver, so be sure to note the spot price to ensure you get a fair price. Likewise, if you need cash quickly, you may not be able to get full value for your physical silver, especially if you have to go through a dealer.
Be careful when purchasing collectible coins as you will likely pay extra for the collectability of the coin, meaning you will be paying too much for the actual silver content. Finally, silver, like all physical assets, is subject to theft, so you will need to protect it and perhaps even insure it.
2. Silver futures
Silver futures are an easy way to bet on the rising or falling price of silver, without the hassle of owning physical silver. You could even physically deliver the silver, although that is not the typical motivation of those who speculate in the futures markets.
Silver futures are an attractive way to play the silver market due to the large amount of leverage available in futures contracts. In other words, you need to put in relatively little capital to own a relatively large position in the metal. If silver futures move in the right direction, you’ll make a lot of money very quickly, but you can lose it just as quickly if you’re wrong.
Risks: Leverage in futures contracts works both ways, meaning it magnifies your profits and your losses. If the market turns against you, you will have to put in more money to maintain the position. And if you can’t, the broker closes the position and you are left with a loss.
Futures are risky and more suitable for sophisticated, sophisticated traders. You also usually need a large account balance to get started. Finally, only a few online brokers offer futures trading.
3. ETFs that own silver
If you don’t want to own physical silver directly, but also want a lower-risk method than futures, you can purchase an exchange-traded fund (ETF) that owns physical silver. You get the potential reward of owning silver when the price rises, but less of the risks such as theft. An ETF that owns physical silver provides the return of the silver price minus the expense ratio of the ETF.
ETFs offer another advantage. You can sell your silver at the market price and the funds are highly liquid. So you can sell your money at the likely best price on any day the stock market is open.
The two main ETFs that own physical silver are iShares Silver Trust (SLV) and Aberdeen Standard Physical Silver Shares ETF (SIVR). Traders can also bet on the silver market through an ETF that holds futures contracts through ProShares Ultra Silver (AGQ), although this is better as a short-term bet than a long-term investment due to the way the fund is structured.
Risks: Like gold and other commodities, silver can be volatile, especially over short periods of time. But with an ETF, you can avoid some of the bigger risks of owning physical silver yourself, namely the risk of theft, illiquidity, and poor pricing when it comes time to trade.
4. Silver mining stocks
You can also profit from a rising silver market by owning shares of companies that mine the metal.
Owning a miner can benefit you in two ways. First, if the price of silver rises, the company’s profits should rise along with it. In fact, silver miners’ profits will rise faster than the price of silver, all else being equal. Second, the miner can increase production over time, which also increases his profits. That is an additional way to win with silver, in addition to betting on the price itself.
Risks: Any time you invest in an individual company, it is important to do a comprehensive analysis to ensure you are buying a high-quality company that can succeed. Many miners are risky people, and some have yet to dig a hole in the ground, let alone extract silver from it. And because their profits depend on the volatile price of silver, mining stocks can be volatile too.
5. ETFs that own silver mining companies
If you don’t want to do a lot of analysis on silver miners, but still want the benefits of owning a mining company, you can turn to an ETF that owns silver miners. You get diversified exposure to miners and lower risk than owning one or two individual mining stocks.
According to the ETF database, three ETFs are classified as silver miners: Global
Risks: A sector ETF reduces the costs of any individual miner that is doing poorly, but anything that affects the entire sector, such as a falling silver price, will likely hurt the fund significantly. And pay close attention to what’s in those funds, because they are not all created equal. Some may offer more exposure to higher quality companies, while others focus more on riskier junior miners.
Is silver a good investment?
Investors love silver for many of the same reasons they love gold and precious metals in general. Here are some of the top reasons:
- Gives back: Over certain periods of time, silver has outperformed highly regarded asset classes such as stocks.
- A store of value: Silver can hold its value and even increase over time, giving investors a way to generate profits.
- Liquidity: Silver is generally a liquid market, and if you buy certain types of silver assets, they are highly liquid.
- Less correlated with asset markets: Part of silver’s appeal is that it is less correlated with other markets such as stocks, meaning it can act as a hedge against those markets.
- Diversification: Because the metal is less correlated, silver can act as a way to diversify a portfolio, reducing risk and potentially increasing returns.
Of course, silver is not without risks or disadvantages.
Silver itself doesn’t generate cash flow, so it may not be clear when it’s a good time to buy. That’s unlike stocks, where the underlying company may be cheap based on its earnings or future prospects.
Second, because silver doesn’t generate cash flow like a business does, investors looking to make a profit must rely solely on someone else paying more for the precious metal than they do. In contrast, owners of a company – through individual stocks or ETFs – can benefit from the rising price of the commodity or the company’s increased earnings. So those who own a stake in these types of companies have multiple ways to profit from silver.
Is now a good time to invest in silver?
Investors can consider investing in silver in several scenarios:
- Supply and demand are no longer connected: If the supply of silver does not keep up with demand, this can cause the price of silver to rise.
- An attractively priced company becomes available: If you find a company that is ramping up production or can benefit from rising silver prices, this could be a good time to buy.
- You need protection against inflation: Some investors are turning to commodities like silver as a way to hedge against inflation
- You want to hedge your portfolio: If you have significant exposure to rising silver prices in your portfolio (for example, silver is a key input to your businesses), you can buy silver and help offset that exposure.
- You want to add commodities to your portfolio: Silver can be part of an allocation to commodities in your portfolio, allowing you to diversify your investments and reduce your risk.
While adding silver to your portfolio can be a useful strategy for more advanced investors, beginners may be better served by building a well-rounded portfolio made up of the best investments.
In short
Investing in silver is not for everyone, and some investors prefer to focus on cash flow activities rather than investing in the metal itself. Investors in companies can win in multiple ways, which is why super investors like Warren Buffett choose companies over commodities.
It’s easier and cheaper to own stocks or ETFs than physical silver, even though they are more liquid than the actual shiny stuff. Still, owning precious metal means that you have no counterparty risk (e.g. with an exchange or a company), even though the investment depends solely on you for safekeeping.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making any investment decision. In addition, investors are advised that the past performance of investment products does not guarantee future price increases.
