What Kind of Silver Should I Buy?
So, after weeks, months or years of research, you have come to the conclusion that adding silver to your portfolio makes smart financial sense. Whether your reasons are simple, like diversification of assets, or complex, like preparing for a collapse of your nation’s currency or SHTF (Sh*t Hits the Fan) scenario, acquiring a physical commodity can be easy. Naturally, you will need to know how to determine what type of silver you should buy.
Silver comes in many different types, and have varying ownership pros and cons.
Types of Silver
- Ingots (regular and irregular)
- Sterling silverware and like
- Jewelry and jewelry supplies
- Futures Contracts (SLV)
- Silver Certificates
- Allocated and Unallocated Pool Accounts
- Waste (x-rays, film byproducts)
- Scrap (broken jewelry, fillings)
Tip: Some silver products can be purchased as part of an IRA. Check with your IRA holder to see what types they allow.
Things to Consider When Deciding What Type of Silver to Buy
Deciding what type of silver to buy is a personal one, which is why I am giving you a four-part process of things to consider so that you can decide for yourself. When buying silver, you can seek out the advice of others, but ultimately you are responsible for your own decisions and you only have yourself to blame if you make the wrong one.
- Bullion vs. Numismatics
1. Budget - This one is easy. How much do cash or credit you plan to allocate to silver? Do you have a lump sum that you want to invest in a silver product that will sit for a few years, or would you prefer to make smaller purchases at regular intervals? How about both?
Lump sum - Investing a lump sum, especially a sizable one, is a risky endeavor. How do you know if you bought at the right time? Are you prepared for the price of silver dropping as soon as you buy, perhaps even by as much as 30-50%?
Regular interval purchasing - Rather than put all your eggs in one basket, or price point,consider buying once per month, on a set day, for a set amount. Known as dollar cost averaging, this will help you smooth out your purchases. One month you might purchase silver for cheaper than the previous month. The next, it could be higher. Using this strategy takes the emotion out of investing in silver and allows you to stick to a long-term plan.
Compromise - If you don’t like the idea of choosing between the two, try a hybrid of both. After doing your research and determining you are ready to pull the trigger at today’sprice, spend half of your available lump sum. Then, dollar cost average in the rest of your lump by making monthly buys on predetermined dates.
Tip: If you can, stick away some extra cash as often as you can in a Dip Fund. If the price of silver dips to a point that makes sense for an additional buy, immediately spend your Dip Fund to take advantage of wild price decreases.
2. Storage - The problem of storing silver must be considered when deciding what type of silver to buy. If you don’t like the idea of going in person to purchase physical silver, or purchasing physical silver online to be shipped to your home, you might consider “paper” silver. Paper silver refers to silver futures markets, usually the COMEX silver market. This allows traders the option to profit from the volatility of the silver market without ever taking physical delivery.
If you decide to go with physical silver:
Safe Deposit Box - The safest way to store silver is in a bank safety deposit box. Because silver is so affordable, your stack can quickly become heavy and bulky, and home storage becomes an issue. A safe deposit box also gives you peace of mind that if your house is robbed or burns down, your hoard will be safe. Opponents of safety deposit box repeat a mantra: If you don’t hold it, you don’t own it. They point to the 1933 goldc onfiscation by the U.S. federal government, when people were required to open their safety deposit boxes in the presence of federal agents and surrender any gold coins.
Home Storage - Storing your silver at home also gives you peace of mind that if an emergency occurs, you will have immediate and unfettered access to your stash. A heavy duty fireproof safe that can either be hidden in the wall or bolted to the floor is recommended. As you build your stack, you will become obsessed with the coins, and having them at home satisfies that nagging urge to fondle them. Remember, though, no safe is impermeable to an intruder with a gun to your head.
Bury It - Honestly, some people do bury hoards of silver coins in the ground. If packaged correctly, your silver coins and bullion should be fine. Just make sure to remember where you bury it, and choose a location where someone with a metal detector will not stumble upon it.
Tip: Don’t talk to anyone about buying silver. Tell your family members to do the same. If you get drunk at a bar and blab about your huge silver stack, don’t be surprised if your stack gets taken from you in the near future.
3. Bullion vs. Numismatics - One of the most important factors in deciding what type of silver to buy is your opinion on numismatics. Numismatic silver is bullion in coin form that has collectible value. If you are already a coin collector, chances are you will be drawn to higher end silver coins like graded Morgan dollars and bullion coins like Chinese Pandas, Australian Kookaburras, and the Lunar series coins.
You should know that if you are buying strictly from a price and profit standpoint that numismatic silver products cost more than bullion, sometimes significantly more. So why would I pay more for a numismatic silver coin? Along with the higher price should come a higher resale value. Many numismatic collectors point to the theory that their coins will hold more of their value if the price of silver tanks.
If you are looking to get the best price for silver, you only have one more question to answer - junk silver vs. fine silver. Junk silver can be bought at or below spot price, but is resold for a lower price than fine silver. Junk is usually not marked on the coin as containing silver, so you are relying on the hope that your buyer or transaction partner recognizes what junk silver is. Fine silver should always be marked .999, .9999, .999+, 999, and will usually say “fine silver” and indicate the weight.
Tip: Make sure that whatever you buy, you choose a product from a known refiner or mint. Trusted names include Johnson Mathey, Engelhard, Sunshine Mint, Scottsdale, Apmex, A-Mark, Kitco, and Northwest Territorial Mint.
4. Liquidity - The final factor you want to consider is liquidity. This answers the question how easily can I sell my silver, and at what resale value? Generally, silver bullion coins minted by world governments command the best recognition and resale value on the market. This means more potential buyers, and a higher chance of getting the price you want.
If you are buying silver for an end of the world preparation plan, buying bags of junk silver coins will be your best bet. This will leave you with a ready source of low-denomination coins with which to barter, backed by a known silver content.
Hopefully I have left you with some important things to consider when you decide what type of silver to buy. Remember, as I mentioned, you should do your own due dilligence (DYODD) when it comes to silver. Hope to see you in 20 years with a stack of silver bigger than your house and worth five times as much.
FOR MORE INFORMATION ON BUYING SILVER, VIEW MY RELATED ARTICLE ON THE BEST WAY TO BUY SILVER COINS
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