Is Silver a Good Investment?

Is Silver a Good Investment?

For centuries silver, not gold, was the precious metal of ordinary commerce. Numerous currencies, from the mark to the pound to the dollar, were defined as weights of silver. From Europe to China to the New World, silver coins were the currency of choice. Silver defined what it was to be cold, hard cash.

That continuous demand over centuries hasn’t abated, as investors today trust silver just as much as gold to protect their wealth when they really need to. Unlike paper assets that can fluctuate wildly with market conditions, silver’s value remains relatively stable. It maintains its value over time, which is why it forms a central part of so many investors’ portfolios.

Silver is in constant demand from investors, jewelers, and industry. With new industrial uses for silver being discovered all the time, and with above-ground silver stocks continuing to decline, the long-term outlook for the silver price remains bullish.

In fact, the silver price has far exceeded analysts’ expectations in 2020, becoming one of the hottest investment assets of the year. Professional investors have become much more bullish about silver too, increasing their holdings of silver as they expect silver prices to continue to rise the rest of the year. And silver exchange-traded funds remain big buyers, continuing to increase their holdings of silver.

By investing in silver, investors can help diversify their portfolios, hedge against the risk of financial turmoil and inflation, and protect their wealth for years to come. And with a silver IRA they can invest in silver while still enjoying all the same tax advantages as a traditional IRA. The more you learn about silver and investing in a silver IRA, the more you’ll realize the reasons silver can be such a good investment.

What Are the Advantages of Investing in Silver?

Unlike paper assets such as stocks and bonds, silver is an actual asset, a store of value. Stocks are a claim to ownership in a company, but if the company fails then your “asset” is worthless. It’s the same with bonds – if the company issuing the bonds goes out of business then you’ll be lucky to get pennies of your principal back.

Silver, on the other hand, is one of the world’s most widely traded commodities. It’s in demand around the world, on commodities exchanges, at coin shops, and online. Just like gold, silver is seen as a final store of value, the ultimate money when paper money becomes worthless.

Just like gold, silver can help protect retirement portfolios against inflation and help investors maintain value during financial downturns. With a track record dating back thousands of years, it’s no wonder that investors continue to trust silver to protect their investments. To answer whether silver is a good investment or not, we must look at some of the most relevant advantages to diversifying your investment portfolio with precious metals.

Protection

Silver can protect your assets both in the long term and the short term. While many investors hold onto silver for years or decades to protect their portfolios, silver’s performance during times of financial stress has made it a popular investment target in recent years.

Whereas stocks lost well over 50% of their value during the 2008 financial crisis and took over five years to regain their pre-crisis levels, silver maintained its value and continued to grow. In the years after the financial crisis, silver nearly quadrupled in price, helping boost the value of investment portfolios just when investors needed it most.

Just like gold, silver tends to increase as stock markets begin to perform poorly. And with all indicators pointing to the next couple of years being rough for stocks, that puts silver in position to capitalize on that weakness. When stocks are expected to decline in value, silver can be a good investment to act as a hedge.

If you’re worried about the value of the assets in your 401(k) account plummeting during a stock market crash, think about rolling over some of those assets into a gold and silver IRA. You can do that tax-free, allowing you to lock in the gains you’ve already made in stock markets and transfer them into silver.

Silver has always played second fiddle to gold, which is easy to understand. But silver can provide an affordable method of asset protection to those who may balk at paying thousands of dollars for each gold coin. Silver’s low, favorable price ratio to gold currently makes it an undervalued but very important part of any investment portfolio.

Tangible Money

Another important characteristic of silver is that it is tangible. That in and of itself provides a useful benefit. As the old saying goes, a bird in the hand is worth two in the bush.

Stocks can rise and fall in value as economic conditions fluctuate, and bonds can fall in price very quickly as the financial positions of their issuers deteriorate. They’re akin to promissory notes, a promise to pay at some point in the future. But that future date may very well arrive and you’ll have no ability to recoup your investment.

With silver, on the other hand, you’ll always have that physical metal to turn to. It’s always in demand and, unlike stocks and bonds, you’ll never face a situation in which you can’t find a willing buyer for your silver. For this reason alone, you may consider silver a good investment.

Affordability

Silver is often referred to as “poor man’s gold.” Its much lower price enables those who aren’t of great means to get their feet wet investing in precious metals. Whereas $50,000 will get you a roll of gold coins that will fit in the palm of your hand, that same sum will buy you enough silver to fill a backpack.

That can make it a little more difficult to store or transport, but it can make it easier to sell off in small quantities too. While you can buy smaller gold coins in weights down to 1/10 or 1/25 of an ounce, the premiums you’ll pay can be much higher than those on standard silver coins. That makes silver the obvious choice for those who want the flexibility to buy or sell in smaller increments than they would have to if investing in gold. And if you choose to invest in silver through a silver IRA, there are numerous IRA-approved silver coins coins from which you can choose.

High Returns

Because demand for silver is influenced to a greater degree by industry than demand for gold, silver can offer higher returns than gold. A boost in demand can lead to price increases that, percentagewise, are greater than those of gold. A $10 increase in gold’s price may be a good gain, but a 35-cent increase in silver’s price is triple the percentage.

That’s not an uncommon occurrence either, as during bull markets silver’s gains can easily outpace those of gold. While gold may get the headlines and the attention, savvy investors know that silver can be just as important an investment to buy as a hedge as gold.

Strong Tradition

Silver has a strong tradition of helping investors maintain stability. Because it was used for so many years as currency, many Americans today still remember the days of using silver coins. That continued familiarity works to silver’s favor.

Silver also maintains its value against paper assets such as stocks, bonds, and even the dollar. Whereas the value of the silver in a silver dollar used to be a dollar, today its silver content is worth over $18. Compare that to a paper dollar, which has lost 96% of its value since 1913.

Anonymity

Silver also has some cash-like benefits because you can invest in it nearly anonymously. While large transactions may trigger reporting requirements to the IRS, many investors acquire their silver coin-by-coin. While you can never remain completely anonymous, buying your silver and keeping it stored securely is a sure way to keep much of your wealth away from the prying eyes of those looking to take what’s yours.

What Are the Disadvantages of Investing in Silver?

No analysis of silver would be complete without listing and discussing its disadvantages too. Like any investment asset, an investment in silver is best suited to investors for whom it can offer the right performance. Whether silver is a good investment asset for you depends on your current investment portfolio, your investment aims, and your roadmap for the future.

Price Volatility

The primary disadvantage of investing in silver is its price volatility. While silver can present a significant upside when it’s growing in price, it can just as easily drop in price when market conditions favor a price decline. Part of that is due to silver being both an investment asset and an industrial commodity. While industrial demand is generally steady, during times of rapid and severe economic slowdowns or contractions, the silver price can drop suddenly without warning. We witnessed that in early 2020 with the COVID-19 lockdowns: as industrial activity ground to a halt, industrial silver demand dropped, and the silver price fell as a result.

Thankfully, investor demand picked up the slack, and as a result the silver price has increased again and made great gains this year. That’s one of the flip sides of the potential for silver falling. When industrial conditions are primed for a silver price fall, they’re generally favorable for a pickup in investor demand that will counteract that. Still, if you need to sell silver when the price falls, such as taking a distribution from a silver IRA, you may not be able to wait until the price recovers.

Bulky

While silver may be beautiful, it’s also bulky. While $50,000 in gold coins can fit in the pocket of your pants, $50,000 in silver would need a large cardboard box or backpack and would be quite heavy. For many investors, that means it’s more practical to invest in gold when investing large sums of money for the long term, and to hold smaller amounts of silver for shorter- and medium-term investments.

Storage Costs

Because of silver’s greater bulk, it takes up more space in storage, too. If you’re storing your silver at an offsite location that charges based on the amount of space you use, that could mean that your silver investment ends up costing you more in storage fees than an equivalent dollar amount of gold.

Potential for Theft

As with any tangible asset, there’s always a risk of theft. But that risk can be mitigated by choosing storage options to minimize that risk. Depending on how you invest in silver and where you store it, the risk of theft can range from highly likely to quite minimal. Buying silver coins and storing them at home is often the riskiest option, with safe deposit boxes being a safer option. And purchasing coins through a silver IRA and storing them with a depository is one of the safest options of all.

What Is the Level of Risk in Investing in Silver

Like any other investment, investing in silver carries with it some risk. There’s always the potential for your investment to lose value, just as with any other investment. But overall, there’s a reason investors choose to invest in silver. Despite the risks, the risk profile of silver differs from that of many other conventional financial investments.

For one thing, the fact that so many investors flock to silver during times of economic turmoil marks silver as a safe haven asset. That silver tends to perform well when stock markets are underperforming is another advantage to investing in silver.

The primary downside risk to investing in silver is holding silver when the economy is booming and stock markets are climbing, as that means potentially missing out on better gains. But that’s something you’ll have to think about as you adjust your portfolio’s holdings to adapt to varying economic conditions. At the end of the day, it’s your decision as to whether investing in silver raises or lowers the risk profile of your investments.

How to Figure Out If Investing in Silver Is Right for You

While silver can be a great investment, the timing of investing in silver can make a big difference in the returns you make and, consequently, can determine whether investing in silver is right for you. Buying low and selling high is the name of the game, as it is with all other investing. Knowing whether silver is the right choice for you means looking at the current makeup of your investment portfolio and the amount of time you have before you plan to retire.

Depending on how much longer you’ll have until retirement, and how diversified (or not) your investment portfolio is, silver could be a good choice for you not only to make possible investment gains, but also to diversify and de-risk your assets. With the current upside potential of silver, the ability of silver to benefit your retirement savings should continue to grow.

While the advantages of silver are numerous, the best way to find out for yourself how silver can benefit your retirement assets is to take the plunge and learn more about how to invest in silver. With a silver IRA you can help protect your investments and keep them safe no matter what happens to the economy.

Investing in silver through a silver IRA is a proven way of protecting wealth. With the ability to use pre-tax dollars to invest in silver, to roll over existing retirement savings into a silver IRA, and to defer taxation on gains until you decide to take a distribution, a silver IRA can be just the ticket to help grow your wealth and protect your hard-earned investments. Talk to the experts at Goldco today to see how a silver IRA can help you achieve your retirement dreams.

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