Nowadays, investors are spoilt for choice when it comes to investing in silver. A variety of ways to invest in silver are available to silver investors of varying investment sizes, timeframes and risk appetites.
The most traditional way of investing in silver is to buy some silver bars or silver coins. Small quantities of silver coins, silver bars or silver wafers can be purchased for as little as $15 or less.
Silver bars are sold at very little premium above the silver value and they can be easily purchased or sold at major banks and bullion dealers all over the world.
Silver coins are another popular investment choice for the small silver investors. Two types of silver coins are available for the silver investor. They are silver bullion coins and collectible silver coins. Silver investors looking to invest purely in silver should buy silver bullion coins instead of collectible silver coins, which are more expensive as they carry numismatic value.
Owning physical silver such as silver bars and silver coins are a good way to make a small investment in silver. There is also no storage fee involved since they can be kept at home. There is also no risk of fraud unless it's a counterfeit silver bar or silver coin. Hence, always check your purchases and buy from reputable dealers.
However, for large investment amounts, it would be quite impractical and risky to own physical silver as transportation and storage becomes an issue. In this case, non-physical or paper silver would be a more convenient, safer alternative.
The earliest form of paper silver was the silver certificate. Each certificate gave its holder an entitlement to a specific amount of physical silver, redeemable upon demand against the issuer.
The issuer of the silver certificate, typically a bank or a major financial institution, provides a central depository where tons of silver bars are securely stored in a vault.
In the past, the U.S. dollar has been issued as silver certificates, each represented one silver dollar payable to the bearer on demand.
Some banks offer what is known as a silver savings account where the bank acts as custodian for physical silver. A silver savings account works just like any regular savings account except that the balance is denoted in silver ounces or some other common units of silver weight. However, unlike regular savings account which pays the depositor an interest, a silver savings account charges an administrative fee (in ounces of silver) every month.
Modern Financial Alternatives
The modern financial world offers the silver investor a wide range of means of gaining access into the silver market.
Silver Stocks, Mutual Funds & ETFs
Many silver mining firms trade in public stock exchanges worldwide. Investing in silver by holding shares of a silver mining company is not as straightforward as buying silver itself. For more details on how this form of investment works, see silver stocks.
Alternatively, you can also participate in silver's long term appreciation by investing in silver mutual funds or silver ETFs.
Silver Options & Futures
For short term speculative bets, you can take up a position by buying silver options or futures contracts. These derivatives offer leverage to the silver investor, allowing him or her to control a large position in silver for a relatively small investment. On the flipside, the chance of losing one's entire investment is high, making them very risky investment options.