Monday, March 14, 2011

Live Money: How to Invest in Silver: “wealth management portfolio”

A lot of people are considering precious metals investment as a significant part of their wealth management portfolio. Platinum, gold, silver and other metals such as palladium and titanium that have great monetary value are some of the options you can choose for investing. However, gold and silver are the most common metals that investors choose, where silver is the cheaper option. Gold is more valuable than silver and it backs some of the major currencies in the world, but silver can also be a great option to invest in.

Why Invest in Silver

Silver may not be as expensive or even attractive as the yellow metal, gold. However, it can be a great choice for investment, considering the many uses it has and the likely decline in its global reserves. Usually, a major part of silver is obtained from zinc and copper mines, with the silver mines contributing only 30%. But as silver has numerous uses in industrial and medicinal productions, the demand is always high. Considering the demand and supply in the future, the probability of an increase in silver prices is very high, making it a safer, affordable investment option.

Different Investment Options for Silver

Silver has always been valuable, and was used as money for a long time in the past. Unlike earlier times, when you could only buy the physical metal for investment, there are a variety of options available today for silver investment.

Buy the Physical Metal – Silver Bars, Coins and Jewellery

One of the best and the easiest ways to invest in silver is to purchase it in the physical form. You can choose from a number of silver bullion options that include silver coins, bars, silverware and silver jewellery.

  • Silver Coins – Silver coins come in a variety of designs and can weigh anywhere from 1 ounce to 1 kg. You can choose to buy silver coins minted by private companies, which are available in local jewelery shops, or from national governments that issue special silver rounds such as UK Britannias, US Eagles, Chinese Pandas, and Canadian Maples.
  • Silver Bars – Silver bars, again, can be bought directly from government auctions, banks or private mining companies.
  • Sterling Silver – Sterling silver is a form of physical silver, which is not 100% pure silver. It is made of 92.5% actual silver, and the remaining percentage of other metals such as copper. As pure silver is too soft to be molded in to intricate designs and larger moulds, sterling silver is often used for manufacturing jewellery and other forms of silver ware like cutlery, frames etc.

As silver is relatively cheaper, you can purchase a few kilos of the metal with just a few thousand dollars. However, as storing and securing such quantities of this metal is not easy, you can choose from the other silver investment options below.

Silver Futures

You can invest in silver futures by opening a futures trading account that allows you to buy or sell silver for gain. In futures, you have to get into a contract that can be a little expensive and risky. Usually, a single silver futures contract represents 5,000 ounces of silver, and expires after a month. Although silver futures may not become useless like a few stocks, considering the risk, you should not invest in them unless you are an experienced trader.

Investment in Silver Stocks and Silver Mines

There are a number of silver mining company stocks in the UK and around the world. You can look for private companies and silver mining companies, in major exchanges like London, NY or Tokyo, that offer stocks in the silver sector. Although silver stocks are usually safer than other stocks, there is an element of risk involved as silver prices can be highly volatile.

Perform a background check thoroughly, for each of the available stocks, to figure out the profitability and risk before investing. An advantage of investing in silver stocks is that, although it is risky, it gives you the flexibility to buy and sell it like any other stock for profit.

Mutual Funds

Like silver stocks, silver mutual funds can be a good choice for investing in silver, if you do not want to have the actual metal in your possession. You can either choose to invest in actual silver or in the stocks of a silver mining company, through a mutual fund. The best way to choose the right silver mutual fund is to keep in mind your investment objectives and the allocation of precious metals in your portfolio. Although mutual funds are relatively safer and more profitable when compared to stocks, you should invest in them only after thorough research to minimize risk.

Silver ETFs

You can invest in silver ETFs or exchange traded funds simply by opening a brokerage account. As there are a number of silver ETF options in the market, it is a relatively easy investment option. However, before you choose to invest in one, research the trends in silver prices, and the trends in the value of the ETF you’re considering. To make profit with silver ETFs, you should invest in them when the prices are low. Silver is sometimes just one part of the portfolio of an ETF. In such a case, choose an ETF that has sufficient amount allocated to silver, to meet your investment goals.

Among all the options mentioned above, tangible silver and ETFs are often the preferred investment options, as they are considered low risk investments.

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