Sunday, August 14, 2011

Simple Rules for Investing in Silver

American Eagle Silver Dollar
1 oz.

Today's uncertain economy leaves many investors wondering where to put their money. Silver is currently undervalued and one of the few secure places to invest.

Historically the price of silver has been 1/16 that of gold, but in recent years silver has lagged behind, creating an opportunity for bullion investors. Silver is currently a value buy and some precious metals advocates recommend putting 10 to 20% of one's net worth into it.

Investing in Silver

Silver bars are expensive, so many investors choose to buy one ounce coins, particularly American Eagle Silver Coins or Canadian Maple Leaf Silver Coins. Buying the actual metal is preferable to buying shares of a mutual fund or a precious metals exchange traded fund.

As silver becomes more scarce, potential fraud will become more of a threat. Investors should avoid the risk of doing business with dealers who can't deliver the silver they were paid to store for their clients, and would be wise to take possession of the physical metal instead.

Buy Silver Bullion From Established and Reputable Firms

If the price is cheap and it sounds too good to be true, it probably is. Look for established, reputable firms that have weathered all kinds of markets. According to James Cook, President of Investment Rarities Incorporated, "the failure rate in the coin business is 90% every decade."

Be extremely careful in choosing where the silver is purchased. One couple bought a large amount of coins from a local firm and drove immediately home. They had no sooner closed their garage door when the doorbell rang. They answered it only to look down the barrel of a gun; the robber had apparently followed them home from the coin dealer.

Store Silver Coins in a Safe Place

Silver bullion should be stored in a secure safe with a combination lock or else in a safety deposit box at a trusted local bank. Investors should be discreet with friends, neighbors, relatives and especially acquaintances about owning any silver.

If an investor thinks he must store his bullion with a dealer, he should proceed with extra caution. The silver should be stored in his own name, not the dealer's, and if he owns silver bars, the serial numbers on the bars should be itemized on his storage receipt. He should be able to have his silver delivered to him if he ever requests it.

Use a Buy and Hold Strategy When Investing in Silver

Hold the silver for the long term and do not sell too soon for a quick profit. Paper silver is easy to trade, so owning the actual silver metal helps to curb excessive trading. The investment is for the long term and is a hedge against inflation.

Silver is used in medical applications, photography, kitchenware and jewelry, but it is also a highly valued investment vehicle. Because it is so reasonable in comparison with gold, demand for silver is increasing. Although the silver futures market is being investigated for manipulation by some big traders, investors looking for a decent return in the long run should find buying silver coins and bars a good value.

Read more:

China's Strategy to Become the Richest Nation in the World


The Silver Institute

Northwest Territorial Mint

Investment Rarities, Inc.

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