Identifying the Best Investment Options for Silver
written by: Jason C. Chavis•edited by: Donna Cosmato•updated: 9/20/2011
There are a number of different ways to invest in silver, each available to different types of investors. Some of the best silver investments include the collection of tangible metal, a variety of financial securities as well as simple stock purchases.
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Bars, Coins and Rounds
The most basic silver investment is the purchase of physical silver in the form of bars, coins or rounds. Bars are sold in various sizes of troy ounces, usually weighing 10 to 1000 ounces. Coins come in a variety of shapes and sizes and are generally issued by a government or private enterprises for the purpose of investment as well as functioning as a collectible.
In the United States, most coinage was made of 90 percent silver before 1964. This means that dimes, quarters and half dollars have a worth higher than the face value. Most other countries followed suit over the following decades. The most common way to purchase silver, however, is in the form of rounds. These are generally a single troy ounce of .999 silver and are marketed by thousands of mints around the world.
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One of the most common ways to invest in silver is to purchase shares of a publicly traded silver mining company. This can be accomplished either by buying direct stocks or investing in a mutual fund which spreads out the risk to many companies. A challenge with choosing mining companies, however, is the fact that the commodity price is not the only factor involved with the price of shares. Silver is usually found along with other types of metals, meaning that the company deals in additional products, such as copper. This can drive the price of shares up or down depending on the commodity price for the other products.
Left: Silver ore. (Supplied by the U.S. Geological Survey; Public Domain; http://upload.wikimedia.org/wikipedia/commons/6/64/SilverUSGOV.jpg)
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COMEX Silver Receipts
Silver is also sold as derivatives in the form of futures and options. Within the United States, these can be purchased on the Commodity Exchange (COMEX), a subsidiary of the New York Mercantile Exchange. COMEX stores tangible silver bullion, which it offers to investors. The bonus of purchasing silver receipts from COMEX is the fact that there are no markups and the price is identical to the exact commodity value, meaning that each certificate is valued at the current price of silver. According to Peter Cooper of Arabian Money, investing legend Warren Buffett says this is one of the best ways to invest in silver.
Right: Mexican silver coin. (Supplied by Oscargilfc at Wikimedia Commons; GNU Free Documentation License; http://upload.wikimedia.org/wikipedia/commons/7/79/Onzalibertad.jpg)
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Silver Certificates and Digital Currency
Another form of investing in silver without actually dealing with the metal itself is in the form of silver certificates and digital silver currency. While governments, such as the United States issued silver certificates in the past, modern economic policy does not support this form of distribution of precious metals.
The only organization in the world to offer government-backed silver certificates is the Perth Mint in Western Australia. This is a viable option for investors because the silver is protected by the nation's government and insured by Lloyds of London.
Other firms, such as eLibertyDollar, offer some of the best silver investments in the form of digital currency, where the investor has no actual silver but a digital document representing ownership.
"Are silver and gold liquid investments?" The answer to that question is "yes!" When balancing your portfolio, its important to understand what the best silver investments are, especially if you are a beginner.