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The Silver Bull - How to invest in silver, for any budget.

Updated on March 26, 2011
Courtesy of Carey Pressley
Courtesy of Carey Pressley

How to invest in silver.

It is said that the smart money is investing in gold, but the smartest money, is investing in silver. Investing in silver is a great way to make some money and secure your retirement. Silver today was right around $36 an ounce. Many people believe we could see silver go to $50 per ounce over the next 6-12 months and, potentially $250 per ounce over the next 2-5 years. I couldn't agree more. No matter what type of investor you are, and no matter what size of portfolio, there are many compelling reasons why you need to own silver.

However, as with any investment, there are no guarantees. Before you buy, I suggest you do your homework. If you do not understand how to invest in silver ask a professional. Now that my fiduciary duties have been met, here are some easy ways to invest in silver, no matter what your budget is.

$50-$2,500

Here I would start with silver coins or bars. The best place to purchase these are pawn shops coin stores, or auction sites like ebay. I prefer coins over bars because of their convenience. If you can't afford to buy a lot right away don't worry. It does not matter where you start, it matters where you finish. I would focus on accumulating as many ounces as you can, when you can.

Keep in mind you will not get rich over night this way. The goal here is to acquire as many ounces as you can, and wait for appreciation.

Here is a tip when buying silver. Ask the seller how close to the spot price they buy and sell their silver. The spot price is the current market price of the commodity. You can check the spot price of silver by visiting the NYMEX website. The closer to spot you can get, the more money you will save, and ultimately make. I would call around first to find the best deal

$2,500-$5,000

If you have a minimum of $2,500 you can puchase silver through wholesale dealers such as Monex or Rosland Capital. These companies are similar to Sams Club, the more you buy, the more you save. These dealers also provide financing options that allow you to leverage up to 4-1.

My strategy here would be to utilize a 2-1 leverage, and make regular payments on the silver financed. I am sure I will upset some brokers here, but I would not trade the silver at this point. Trading the silver opens you up to additional risks, and at this level, I dont believe you can afford to take those risks.

If you leverage 2-1 a $2,500 investment buys you $5,000 of silver. The advantage here is, while you are making payments on the silver, if it goes up 5%, you made 5% of $5,000, not the $2,500 you invested. In other words, it increases your return on investment.

$5,000-$25,000

Here I would utilize a full 4-1 leverage. With $20,000 + of silver you are not looking for very big movements. You can get in and out of the markets rather quickly and, mitigate your risk. At this level you could have a short term horizon.

Unless you have experience trading the market, I would not do this alone. The benefit of working with dealers like Monex, is that they have trained account executives that are there to help you and answer your questions.

This strategy carries a higher degree of risk than the previous two. It is important that you understand those risks and invest accordingly.

Things to consider...

When buying on leverage, you will be required to keep a minimum level of equity. If the value of your silver decreases, you may need to send in more money to your account. This is why I only recommend a 2-1 leverage for the second group. Talk with your account executive about how and when you might need to send more money. When the market goes back up you will recapture the additional monies you sent in.

There are fees associated with financing your silver. In addition to commission, there are monthly storage fees and interest. Make sure you understand what these fees are and what they mean to you.

There are other ways to invest in silver, such as silver stocks, futures, and silver mining projects. However, I believe investing in the physical metal, is a more conservative strategy and, can make you more money in the long run.

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    • jagandelight profile image

      jagandelight 7 years ago from Florida

      Thank you for answering my questions, you have certainly been patient with me. You have a wealth of knowledge on silver.

    • JMHeller profile image
      Author

      Joshua Heller 7 years ago

      Great question. The spot price is the current price of a stock or commodity. I have included a link above where you can check for current prices.

      Lets say you purchase 100 ounces at a spot price of $35 per ounce.

      The Dealer charges 2% above spot per ounce. (This is how they make their money.)

      Your Total investment would be $3,570

      When it is time to sell, lets say the dealer will buy the silver back at 2%. So your spread would be 4%. The spread is the difference between your purchase price, and the price you will sell to make a profit.

      In this case you will need silver to move more than 4% before you make a profit.

      When you start trading silver it gets a little more complicated. Then you will need to figure in commissions, storage fees, and interest. If you would like some more information on how to do those calculations, let me know.

    • jagandelight profile image

      jagandelight 7 years ago from Florida

      great detail. what exactly is "spot price" can you elaborate more on it and how exactly you figure out how much you'll save or gain.

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