Investing in Silver, Physical Vs Paper

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It is often considered to be a good idea for investors to hold precious metals such as gold or silver in their portfolios in order to hedge against inflation risk and to provide investors with the diversification that simply holding equities does not provide. Silver is often considered to be an good alternative to gold a, while gold is considered more precious and valuable, silver is more often undervalued and is consumable in many industrial processes including photography, solar panels, which makes the metal’s scarcity a real issue for silver supply going forward.

While many investors agree that holding silver is important for investors, there is a real question regarding what the best way of holding silver is. An investor can simply purchase silver coins or silver bullion, but it can be expensive to store these and there is always risk of theft. Further, silver coins can sometimes trade for less than their silver content and need to be melted down to achieve the fair value on the metal.

Alternatively, investors can invest in silver through silver mining companies. Doing so can be risky as the fate of the investment is often correlated to how productive the mine is, how efficient the company and its management are, and what investors think will happen to silver prices in the future, which can be painful to deal with if you are ready to dispose of a silver investment and don’t want to do so at a discount.

Bridging the gap between these options are silver ETFs which purchase silver bullion and store it on your behalf taking a lot of the physical storage concerns and headaches out of your hands. There is a small management fee that is often attached to silver ETFs but many find this added cost will save time and effort in the long run and is well worth it.

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