Guide to Investing in Silver – Chapter 12: Comparison between various forms of Investment in Silver

This is chapter number 12 out of 15. Read the rest:

Read Guide to Investing in Silver – Chapter 1: Introduction
Read Guide to Investing in Silver – Chapter 2: Starting out as a Silver Investor
Read Guide to Investing in Silver – Chapter 3: Silver as an Investment Vehicle
Read Guide to Investing in Silver – Chapter 4: Methods of investing in Silver
Read Guide to Investing in Silver – Chapter 5: Investing in Silver Bars
Read Guide to Investing in Silver – Chapter 6: Silver Coinage as an Investment
Read Guide to Investing in Silver – Chapter 7: Silver in Exchange Traded Funds (ETFs)
Read Guide to Investing in Silver – Chapter 8: Silver Mining Stocks
Read Guide to Investing in Silver – Chapter 9: Silver Mutual Funds
Read Guide to Investing in Silver – Chapter 10: Silver Futures
Read Guide to Investing in Silver – Chapter 11: Silver Certificates

Although there are many ways which one can invest in Silver, each form of investment has it own advantages and disadvantages. Below are listed the types of silver investment with their advantages and disadvantages:

Approved Refined Silver Bullion bars:

The advantages of buying these kinds of bars are that they represent the cheapest form of silver investment. You will pay less premium over the other types of silver investment. They can be converted to cash easily. Because the price of these kinds of bars is quoted widely, they are also internationally negotiable. Their disadvantages are that their portability meant that they have to be stored properly due to risks of theft. You will need assay when you wish to sell these bars. Lastly, silver bars do not yield any interest.

Silver Mining Stocks:

The advantages of these form of investment is that they offer the opportunity for significant capital appreciation. In addition, if the company is well managed, there is also a chance for dividend yield as the company move into profitability. The main disadvantage is that you might need a bigger capital outlay to invest in silver mining stocks than bullion bars. Furthermore, you will need to be well versed in the equity market to pick the right stock.

Silver Mutual Funds:

The main advantage of mutual funds is that they offer a great diversity of investment in the precious metal market. You are able to hold a wider variety of stocks of different companies at a lower cost than when you purchase the stock individually. Also, the diversity of holdings allows you to be buffered against adverse price fluctuations of any particular company. Like investments in the equity market, the disadvantages of mutual funds are that you have to have knowledge of the equity market and also comparatively, silver bars are cheaper to invest in than mutual funds.

Silver Coinages:

The advantages of Silver coins are that they are easily affordable and can be purchased for as little as $10. They are extremely portable and easy to store. They are also very liquid in that they can be converted into cash easily. Like refined bullions bars, they are internationally accepted as prices for these coins are widely quoted. The disadvantages of coins are that they have to be kept safely and they do not yield any interest at all. Because of the perceived numismatic value of these coins, you usually have to pay a higher premium for them than bullion bars.

Silver Certificates and Storage Accounts:

The advantages of these forms of silver investments are that they are extremely liquid and are also traded at very competitive prices. They have no storage risk or sales tax. Furthermore you can invest in them by the dollar amount you wanted. Their values are also easy to keep track off as prices for these investments are widely quoted on the open market. The disadvantages are that you do not own the physical silver itself. In addition, there is a time lag between the delivery of the physical silver if you do decide to take possession of the silver.

Silver Accumulation Plans:

The advantages in Investment in these plans are that they can be had for as little as $100. There is also a discount on the commission payable to acquire these plans as compared to equity or mutual funds. They also have no storage applicable and are highly convertible to cash. You also have the advantage of dollar cost averaging with these forms of plans. No sale tax is applicable also when you acquire them. The main disadvantage is that you do not have possession of the actual physical silver.

Silver Futures Contracts:

The main advantage is that you can gain substantially for speculating in Futures. Furthermore, you also have the advantages of leverage in Futures trading. This means that you have less capital tied up when you invest in Futures. They are also widely traded and thus highly liquid. Lastly, there is no storage risk. The main disadvantage is that trading in Futures is extremely high risk. You could lose more than your initial capital outlay. And to trade in Futures contracts requires that you are well versed in this market.

Silver Options:

The advantages:Like Futures contracts, options trading have a speculative appeal. Since you can trade on margin in options as well, you will have the ability to leverage your trading. There is also risk associated storage with you trade in options. The main disadvantages are that you do not have legal title to the physical silver. The trade is highly specialized and requires in-depth knowledge of the market. Lastly, as with Futures trading, you risk losing more than you invest due to the leveraging factor. 

Read Guide to Investing in Silver – Chapter 13: Investment in Silver versus Gold
Read Guide to Investing in Silver – Chapter 14: How to invest in Silver
Read Guide to Investing in Silver – Chapter 15: Conclusion