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Is Silver a Good Investment?

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In uncertain financial times, people have historically turned to gold and silver as a hedge against inflation and investment losses. But silver attracts heavy investor demand for a number of other reasons. 

Silver has the same attributes as other precious metals but possesses unique strengths and weaknesses. This can motivate a different type of investor behavior. Take a closer look at Benzinga’s guide to see whether silver is a good investment for you. 

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Is Investing in Silver Risky?

There’s no such thing as a guaranteed investment. Any time you commit assets for an expected outcome, you enter a risk-reward situation. 

Many people believe that investing in silver is wise because it holds its value in financial hard times. However, 56% of the silver supply goes to industrial use so it’s more volatile in down markets than gold. In a down market, investors generally regard silver as a hold investment, meaning you should hold onto it for its future growth potential. 

Silver tends to hold its value during market lows and increases in value during bull markets. On the other hand, gold tends to hold its value during good times and increases in value during tough times. 

But this doesn’t mean that silver is immune to a sell-off during a financial crisis. Here are the risk factors for investing in silver: 

  • Demand: Since silver is a top industrial commodity, it is vulnerable to the whims of demand.
  • Random price fluctuations: Global demand affects silver prices. It’s more difficult to keep track of world commerce than oversee local financial events. This could lead to surprise losses.
  • Supply: A surplus of silver can put downward pressure on the price.
  • Inflation: When inflation goes up, the value of silver follows it.
  • Government policies: The U.S. Mint consumes a large percentage of the world’s silver supply. Any change in government policy could affect silver prices.

Silver is not as risky as other commodities, but its volatility is a factor. If you seriously consider a silver investment, read as much as you can about how to invest in silver. 

Where to Invest in Silver

You can invest in silver in several ways. You can buy physical silver in the form of bars, coins, bullion, silverware and jewelry. Some dealers even sell bags of junk silver. 

But the most practical and convenient way to invest in silver is to purchase silver-based securities. On the exchange, you can buy silver-related stocks, futures contracts and silver exchange-traded funds (ETFs). 

Purchasing contracts for difference (CFDs) is a simple way to invest in silver. A CFD gives you the opportunity to benefit from a change in the price of the asset without assuming ownership of it. However, CFDs are very sophisticated and risky. The leveraging aspect of these instruments can cause you to lose a lot of money in a hurry. Proceed with caution with CFDs.  

Though traditional brokers still exist, online brokers offer you a better environment for researching, purchasing and tracking your silver investments. If you’re ready to look into online brokers, see our rundown of some of the best online brokers to consider for your possible silver investment.  

TradeStation

TradeStation’s high-performing trading platform is a big hit with active traders.

Its web-based platform is also a favorite for casual traders. For silver traders, TradeStation offers innovative data analysis, indicators and asset tracking tools.

A $500 minimum deposit allows you to conduct $0 commission trades in stocks and ETFs. Although TradeStation doesn’t offer CFDs, you can trade options for $0.60/contract and futures for $1.50 per contract. 

TD Ameritrade

Top-ranked online broker TD Ameritrade has a stellar package of platforms, tools, analysis, research, trader apps and education.

Its industry-leading AI technology appeals to active and casual traders. Like TradeStation, TD Ameritrade requires a $2,000 minimum deposit for access to a large selection of investments, including forex and futures.

You can trade $0 silver-related stocks and ETFs. Options cost $0.60 per contract and futures cost $2.25 per contract. TD Ameritrade also gives you a chance to give silver-based CFDs a try.

E*TRADE

If you prefer trading in silver-related options, E*TRADE is a good choice.

Its Power E*TRADE platform and exceptional mobile apps appeal to both casual and active options traders. It helps your position management tasks with risk analysis, real-time streaming Greeks and custom grouping. E*TRADE can expand your silver trading opportunities by offering international trading.

It offers $0 trade for stocks and ETF trading, $0.65 per contract for options and $1.50 per contract for silver-related futures.

Firstrade

Firstrade’s unique among its competitors because it extends its $0 trade offer to options. It doesn’t charge contract fees. This means you can trade your silver-related stocks, ETFs, options and futures for free.

You may be satisfied with Firstrade’s research if you’re an early trader. However, it trails behind the competition in platform capabilities and tools. 

eOption

eOption takes a barebones approach to marketing. It offers cut-rate pricing in exchange for traditional trader services.

If you can do without adequate research and platform resources, you can trade your silver-related stocks and ETFs for $0 and options for $0.10 per contract.  You must make at least 2 trades a year to avoid the $50 inactivity fee. eOption is not a boutique broker so it doesn’t offer futures or CFDs. 

Advantages of Silver Investments

Silver has some distinct advantages as a tradable investment:

  • It’s cheaper than gold. You can get just as much crisis protection from silver as you would from gold at 1/17th the price. 
  • You can sell it in smaller increments. Sometimes you may need to sell off some investment assets to cover an expense. Instead of selling a whole ounce of gold, you can cash in a much smaller denomination of silver.
  • It’s a bullish asset. In a bull market, silver prices move up much faster than gold.
  • It’s better than money. This is a good reason to own some physical silver. Silver and gold are the truest forms of money because you can’t readily reproduce them. Silver is original and rare. 

Disadvantages of Silver Investments

Some of the silver attributes contribute to its disadvantages. Most of the disadvantages apply to physical silver ownership: 

  • It’s a poor earner. Silver is primarily a safeguard investment. For appreciable returns, it doesn’t perform as well as real estate and other investments. 
  • It’s not liquid. It’s rare that you can trade physical silver for on the spot goods. You need to convert physical silver into cash, and this may take a while. 
  • Theft is possible. Holding physical silver comes with the risk of it being lost or stolen.

Is Silver Right for You?

Silver is like any other investment — there are no guarantees and it’s risky. An investment in silver can help you offset losses in a financial crisis. Decide whether you are looking for a solid long-term investment with safeguarding features. If that’s your aim, silver may be right for you.

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