Silver makes a great investment. It has many different uses and silver has been used as money since 600 BC. Also right now the price of silver is historically low, so it's a great time to buy.
This is our complete guide to buying silver. We hope that you can use this guide as a reference and we hope it answers most of your questions about silver investing.
- Why Invest in Silver?
- Can You Buy Silver at Spot Price?
- Silver Bars
- Silver Coins
- Where to Buy Silver
Why Invest in Silver?
There are many reasons to invest in silver. Below we will review the most important reasons.
Portfolio Diversification
You shouldn't put all money in one single asset. It's risky to have all of your money in stocks, bonds, or any other type of investment. For this reason it can be smart to diversify and have silver in your portfolio. It's up to you to decide how of your portfolio will be dedicated to silver. Some people go with only 5% while others are over 50%. It all depends on how strongly you believe in silver.
Hedge Against Inflation
Silver is a good hedge against inflation, because it's rare and there is a finite supply.
Just holding the US dollar in a low-interest CD or savings account is not good financial practice. Every year the federal reserve prints out more money. This causes inflation and it makes every dollar worth less. The yearly inflation rate is usually around 1-3%, which might not seem like much but it adds up over time. With silver you can't just print out more of it- there is only so much in circulation and only a limited amount available to be mined.
A Useful Metal
The price of silver is very unlikely to crash because there are so many different uses for silver, in a variety of different industries.
Here are just a few of those uses:
- Engines
- Long Life Batteries
- 3D Printing
- Solar Panels
- Semi-conductors
- Stained Glass
- Car engine bearings
There are more practical uses for silver than there are for gold. All of these uses make silver a great store of value- better than the US dollar and even better than gold. For something to be a store of value it needs to be rare and it needs to have secondary uses.
Emergency Situations
Silver is the perfect metal to have in a doomsday scenario. In a situation where paper money is useless, silver would likely be the most popular form of money. For this reason, we recommend owning silver coins of different denominations. The 1oz coins are great, as well as smaller junk silver coins like nickels, dimes, and quarters. Bars are good to own as well.
Silver ETFs have become popular, but they would be completely useless in an emergency. So that's why physical silver is king.
An emergency situation like this is probably not likely to happen anytime soon. However it's always good to be well-prepared in case it does happen.
Can You Buy Silver at Spot Price?
Yes, you can buy silver at spot price. However it will take a lot of time and effort to find the right seller. You can't go to any of the large online dealers like Money Metals Exchange and buy at spot price. Dealers sell silver at a premium in order to make a profit.
In order for you to buy at spot price, you need to find the right seller. You can put up a Craigslist ad for buying silver and see what type of responses you get. Even then it will be difficult, because other buyers may be willing to pay a little above spot price.
The best way to buy at or below spot price is to go to yard sales and/or estate sales. Here you can find silver at very cheap prices in the form of silver plates, cups, spoons, etc. You just need to make sure the silver is real by looking at purity hints.
When you go to auctions you can bring a small gram scale with you and you can also bring your phone so you can load up a scrap silver calculator.
Silver Bars
Silver bars are a great investment because the premiums are low, usually much lower than silver coins.
Benefits of Silver Bars
Check out some of the great benefits:
Easier to Store
It's really easy to store silver bars because they are easily stackable, and they can fit nicely into a fireproof safe. For this reason, it's also easy to keep track of your silver inventory. Compare this with coins where you would need to count all the individual coins and if they are not 1 oz bullion coins, then you will need to know their silver content. So in terms of bullion, silver bars are a great option. The main advantage is the ability to easily store them.
Silver bars will not easily get lost or misplaced. The same cannot be said for silver coins, as some people have lost or misplaced their coins. Coins are obviously much smaller than bars, and if you don't immediately put them away into a safe, then you could spend some time searching for them in your home. It's happened to many coin collectors. Silver coins are still a good option though and we recommend buying both silver coins and silver bars.
Cheaper Premium
With bars you can pay closer to the spot price of silver. When compared to coins, you'll pay less of a premium so more of your hard-earned money will go towards pure silver. Uncirculated bullion coins can demand a much higher premium, usually in the range of 15-25%.
How low of a premium can you get? That's going to depend on the bar size, the total value of your order, and the dealer you buy from. Typically the bigger your order, the less premium you will pay. But for large bars you can expect to pay around a 5% premium.
Disadvantages of Silver Bars
When compared to coins, it can take longer to sell your bars- especially larger bars. Silver always has a market but a large bar will have less of a market because more buyers are interested in coins.
However if you do need to sell your bars quickly then you can always go to a coin shop and sell them for spot price or a little over spot price. If you have a lot of bars to sell then you would need to find a larger dealer who has cash on hand. We have a silver selling guide in the event that you need to sell.
Silver Coins
Silver bullion coins are a great investment. Bullion coins are valued for their silver content, but some coins are also for their numismatic (collectible) value.
Benefits
Check out some of the great benefits:
Easy to Buy
Silver coins are easy to buy because there are a lot of dealers and you can buy small amounts. Most people can afford to invest as little as $20 a month on silver. Buying regularly regardless of price is called dollar-cost averaging. Over time you can accumulate a good amount of silver, especially if you start investing at a young age.
Great Gifts
New silver coins make great gifts. A child could be given a coin for Christmas and he/she could get inspired to start collecting more and investing more.
Numismatic Value
Along with their precious metal value, coins also have numismatic value. This is their collectible value separate from the metal content. Annual coin series appreciate in value over time, since there has always been a big collector's market for coins.
Let's say you buy some of the newest silver eagles and keep them in perfect condition. In 10 years, that edition will be a little harder to find, and you could then sell your coins for a higher premium. This is especially true for specialty coins from the Perth Mint.
Disadvantages
The disadvantage of silver coins is that you typically need to pay a higher premium compared to silver bars. The most popular bullion coin in America is the American Silver Eagle. It's a beautiful coin and many collectors buy the yearly edition. Typically you will pay spot price plus $2-3, which comes out to a 15-25% premium. This is a high premium so you are getting less physical silver for your money. However the larger your order, the less premium you will pay.
Types of Silver Coins
There are a lot of different coins out there- bullion coins, foreign coins, ancient coins, etc. For bullion, we recommend both the American Silver Eagle and junk silver coins. Both options are collectible and the premiums are reasonable. Numismatic coins from the Perth Mint are another good option.
American Silver Eagles
If you are just getting started then we recommend 1oz. bullion coins such as the American Silver Eagle. These coins you can buy new. Larger orders come in 20 coin tubes which fit nicely into a safe. The 1oz. coins also make it easy to keep track of your total silver value, because all you need to know is the spot price of silver. You can then multiply the spot price by the number of 1oz. coins you have.
There are other 1oz. coins for sale such as the Canadian Maple Leaf, Mexican Libertad, Austrian Philharmonic, etc. However in America they aren't as collectible. The American Silver Eagle is easily recognizable and there is always demand for them. However the premium is high (around 15-25%).
Junk Silver
Junk silver refers to old silver American coins that used to be in circulation. The most common junk silver coins are dimes and quarters which were 90% silver until 1964. So don't let the name fool you, these coins are well-made and they can be found in good condition. It's also nice to own a part of American history and the supply of these coins is limited.
The downside of junk silver is that the coins typically have some wear to them. However you can still find some in great condition. It's also tougher to keep track of your total silver value, as you will need to use a US silver coin calculator.
Storage usually isn't an issue because sometimes the coins come rolled up. If they come in cloth money bags then you can either keep them in the bags or buy coin wrappers.
You can buy junk silver for a low premium, but it depends on the condition of the coin. Coins that are in fair condition can sell for a 3-5% premium. But coins that are in brilliant uncirculated condition (BU) sell for around a 29% premium.
Numismatic Coins
Numismatic coins are coins that are rare and collectible so they command a higher premium. Right now the Perth Mint in Australia produces the most popular numismatic coins. Their coin series include the koala, shark, kookaburra, and kangaroo, among others. For these series, the mint only produces 10,000 coins each year and only 9,000 are sold to the public.
Coins from the Perth Mint are available from all of the major online retailers. The best place to buy coins from the Perth Mint is on Apmex. Money Metals Exchange also has a small selection of coins from the Perth Mint. You'll actually pay more by ordering directly from the Perth Mint, and making an international wiring transfer to Australia will add to the cost.
The downside for numismatic coins is that you pay a high premium. For example the Perth Mint's latest Kookaburra coin sells for a 23% premium. The upside is that your coins can appreciate over time, although it depends on the coin and the market.
Silver Rounds
Silver rounds are basically unofficial coins with a very basic design. There is no face value and minimal numismatic value. The rounds come in all different sizes, but the most popular size is 1oz.
Most of the bullion dealers sell their own branded round. Typically the round has a logo and is stamped with the weight and purity.
The round is valued for the silver content only so the premiums are much lower than government issued coins. The average premium is only around 5%, which is much lower than any legal tender coin.
Overall, if you are looking for a low premium then we would recommend going with junk silver instead of rounds. Junk silver commands a similar premium and is more collectible.
Where to Buy Silver
Certain places are better for coins and others are better for bars. Money Metals Exchange is great for coins and bars, and they are our dealer of choice. At Money Metals Exchange you can also buy numismatic coins.
Local dealers are good for coins, but it depends on the dealer. Overall you have a lot of different options for where to buy, and a lot of it will come to personal preference.
Money Metals Exchange
This is the online retailer that we recommend. They are a reputable bullion company that offers good prices.
With Money Metals Exchange you can expect good prices and good customer service. Buying online is more convenient, and Money Metals Exchange has a large selection of different silver products.
Ebay
For small purchases eBay can be a decent option. It's a legitimate marketplace for silver bullion, but you really need to careful to not buy fake silver. There is a lot of fake silver on eBay and it comes from China. It's not just coins that are being faked- you can find fake silver bars, jewelry, and flatware.
The general rule is that if a deal on eBay is too good to be true then the item is probably fake, or at least you run the risk of buying a fake item. If you do buy a fake item then you can ask for a refund. Ebay's customer service is decent, but its payment processor Paypal is notorious for bad customer service. The easy solution is to just avoid eBay and instead buy from reputable sellers like Money Metals Exchange.
Overall we don't recommend using eBay unless you are an experienced silver buyer, and you know how to spot fake silver.
Amazon, eBay's largest competitor, will also have some coins for sale but they are higher priced. The convenience of buying through Amazon is typically not worth it when it comes to precious metals.
Local Coin Shops
It feels good to shop locally and support small businesses, and visiting your local coin shop can be a good place to buy and sell.
One major benefit of going to a local expert is that you can get free appraisals and expert opinions on what to buy. But the best part is that you can see the actual coins yourself before making a purchase. You don't need to rely on a picture from the internet.
Local coin shops typically just specialize in coins, so it's tougher to buy bars locally. However if you live in a big city then you might have some options. You'll have to ask and see what they have available.
Overall buying locally is a good option but it depends on where you live, and what shops are in your local area. Make sure to read local shop reviews before doing business with a coin shop.
Coin Shows
Most of the major US cities have annual coin shows. These shows can be a lot of fun and they attract hundreds of different coin dealers. Here you can buy and sell coins and make connections with local dealers. Most dealers prefer to be paid in cash, so keep that in mind.
Coin shows are great, but if there are several good coin dealers in your area then it doesn't make sense to go out of your way and visit a coin show.
Conclusion
Silver is a great investment and now is a great time to buy while the price is still low. Money Metals Exchange is our dealer of choice for all of your silver needs.