Silver is often referred to as “the little man’s gold”. To invest in silver, small amounts are often enough and yet silver can be a lucrative investment.
Investors have several options to invest in silver. But which silver investment is suitable and best suited for individual needs?
Reasons to invest in silver
There are various reasons why a silver investment can be interesting. In times of low interest rates and exploding government debt, many investors are looking for a way to hedge their assets.
In this case, silver is exactly the right investment object. Silver is, so to speak, an alternative currency with a real tangible value. Unlike paper money, it cannot be multiplied at will. Moreover, the tangible value of silver cannot be devalued. This is an essential and important difference to, for example, shares or other securities.
With these characteristics, silver offers a promising long-term investment with a real equivalent value that is also largely crisis-proof.
What to look for in silver investment
As with all assets, the price of silver depends on supply and demand. The silver supply is mainly determined by the production volume of the mining companies. But recycling also plays a major role.
Almost 50 percent of silver is required by industry. The silver price is therefore far more cyclical than the gold price, for example. Investors have a greater risk of fluctuation when investing in silver.
There is also a currency risk when investing in silver, just as there is with gold. Both precious metals are traded in US dollars. Currency losses arise when the euro appreciates against the U.S. dollar. Conversely, there is an exchange rate gain when the euro depreciates against the U.S. dollar.
Finally, the relatively high cost of buying physical silver should also be considered. In case of doubt, these can also be at the expense of a return.
Three investment options
Investors have three options for investing in silver. The first option is to invest in physical silver in the form of bars or coins. Another option is to invest in listed securities such as ETCs. Investors participate in the silver price development.
The third option is shares of silver mining companies or, alternatively, index shares. The latter track the performance of mining shares.
Which investment option is the best?
Which type of investment is the best or most suitable in an individual case depends on the purpose of the investment.
If a silver investment is to serve primarily as an investment in value and asset protection in times of crisis, the purchase of physical silver is the most suitable form of silver investment.
If the primary objective of the investment is to achieve a return, it is recommended to invest in silver ETCs, certificates and derivatives.
An equity investment in silver, meanwhile, should be made by investors hoping for an additional return.