Is Silver a Good Investment?

silver

Silver is a valuable precious metal. It holds a high value in many cultures and manufacturing industries. So, is silver a good investment?

If you plan on diversifying your assets, silver can be an excellent idea. It comes with numerous financial benefits that you may not be aware of. Primarily, silver is not overvalued yet like other similar asset classes.

Besides, it is natural to wonder if buying silver can help you protect your wealth since it is not as grandeur as gold. However, they do carry many compelling advantages.

So, if you are in doubt about buying this precious metal, you are in the right place. This article will walk you through everything you need to know about how silver can be an excellent hedge.

Silver Financing: The Pluses and Minuses

silver finances

Silver is classified as a commodity like most other natural resources. Hence, the price of silver will typically move in the direction opposite to that of stocks and bonds. 

Because of this phenomenon, it is no surprise that many investors purchase silver when the economy is struggling. Besides, it can be an excellent way to diversify your asset portfolio.

Silver, similar to gold, serves as a hedge against inflation and other crises. Furthermore, it has an intrinsic value over currencies because silver is a physical asset. 

On the downside, silver is an industrial metal widely used in the medical equipment and electronics industries. Hence, the value of silver is partly controlled by manufacturing industries. This process makes the pricing more volatile than gold.

Why Should You Buy Silver?

Buying silver can bring you more benefits than just diversifying your asset. It can be a hard asset that can help in times of economic instability or political turmoil. Besides, it can even outperform gold at times in bull markets.

If you are not sure of how beneficial purchasing silver can be, consider the below reasons:

Silver is Money

silver is money

In the olden days, precious metals were used in the coinage. Besides, silver has been used more than gold throughout monetary history. Although you can treat silver like currency, it is still worth a lot of money. 

Unlike bonds or stocks, you do not need another party to make a promise or sign a contract. If you own physical silver, you can sell it for money at any time.

Silver is Not Expensive

Unlike gold or diamond, silver is not very expensive, yet it can protect you during inflation. Moreover, silver is more affordable for an average investor than gold. Hence, you can use silver even during a monetary dilution.

Further, if you want to give yourself a hard asset, you can go with silver. It is more affordable and easier to purchase.

Supply of Silver is Falling

The supply of silver has been falling since the crashing of silver prices after 2011. As a result, silver businesses and miners have to cut costs to make a profit. That led to a dramatic cut in the funding of exploration and development of silver mines.

Furthermore, about two-thirds of silver mine is obtained as a byproduct of base metals. For example, silver is a byproduct in the extraction of copper and zinc. Similar to silver miners, these metal miners have also spent less money on exploring and developing.

Demand for Silver is Growing

The demand for this precious metal is growing across the world. With the supply reducing and demand increasing, there will be consequences in the future. However, if you own silver, you will be on the bright side of these effects.

Silver is also used in almost all major industries. It ranges from the electronics industry to the solar energy industry. It is impossible to replace silver with any other metal, owing to its unique characteristics. Hence, the demand for silver in the manufacturing industries is growing.

Risks You Should Consider

It is true that purchasing silver comes with a lot of benefits. However, that does not mean it is completely free of risks. 

There are some cons that you must consider before purchasing silver. Some of them are listed below:

  • Lack of Liquidity: If you possess physical silver, there are chances that you can not liquidate immediately. You will need to convert it to currency first before using it for everyday purchases. Hence, if you want to sell in a hurry, it can be challenging. 
  • Weak Return: Silver is a “safe haven asset” in many ways. However, it may not always payback as well as other options. It can be gold or real estate.
  • Storage Risk: If you purchase physical silver coins or bars, you will face storage risks. You will need a safe space to store it and theft-proof the location. Alternatively, your dealer may offer to store it, but it will cost you extra.
  • Price Fluctuation: Silver trades on both national and international exchanges, making it vulnerable to volatility. Besides, the price can fluctuate drastically over short periods.
  • Fraud Risks: Silver is a very aesthetically appealing metal that can trigger impulsive buying. Hence, there are many fraudulent dealers out there who promise to offer a better deal and scam you. It is vital to be careful and not rush into purchasing silver or other precious metals.

Purchasing Silver in 2021

silver bullion

One of the most popular ways to acquire silver is by buying silver coins and bars. If your experience with silver acquisition is limited, you should consider junk silver. This step can also help you if you have a limited budget. 

Whatever you choose to buy, it is crucial to buy it from a reputed dealer. Before finalizing a dealer, make sure they are a member of a metals industry group. 

Further, research a few dealers and note down their prices. Most dealers offer silver at competitive prices, and if you find the pricing otherwise, it could be a fraudulent dealer.

Final Verdict

If you are still wondering, is silver a good investment, here’s your answer: Yes. It comes with various benefits such as affordability, protection during inflation, and political turmoil.

At the same time, it is vital to consider the risks associated with storage, liquidity, and price fluctuations.  So, if you plan to purchase silver, giving room for its shortcomings, you are on the right path.