Top 10 Reasons Why Investing in Silver is Good Strategy
If you have a thing for the bling, then you are no stranger to owing gold or silver. Typically investment in silver or gold has been opted for due to the uncertainty and wide speculations in the currencies.
Among all precious metals silver is the most common, as it is cheaper and easily available. Silver also has industrial applications and its price is driven not just by supply and demand but also investor speculation.
Though most people would choose to buy gold over silver, the latter has proven to have a better growth potential in recent times. Unlike gold, the volatility of silver is the main reason why investors consider silver rather than gold as an investment option. Silver gives investors an opportunity to derive the best from the price movements which are at times not related to any financial or economic phenomenon.
The absurd movements can also be attributed to the size of the silver market, which is relatively smaller as compared to gold. While a major portion of the investors prefer to buy bullion coins when it comes to gold and silver, investors are also tapping into the return potential of silver through investment in silver driven instruments like ETFs, ETNs and even stocks and mutual fund of mining companies.
As an investor there is always a risk of being caught in the paradox of exploiting silvers speculations versus it being a smaller market lacking the gravitas of gold.
Considering the various investment potentials of the metal here are top 10 reasons why investing in silver today, makes complete sense.
1. A Hard Asset
Physical silver is a tangible property / asset. In a world of online transaction, paper less investments, and digital currencies, silver is an asset that you can carry in your pocket and transfer by mere delivery. The transaction or transfer can be as confidential and private as you would like it to be.
Silver is more durable and compact than currency. Moreover, there is no question of it being erased or being deemed unaccepted which is possible in case of currency through demonetization.
2. Silver Guarantees Liquidity
It may not be part of the currency system, but having a silver coin in your pocket is as good as carrying money. Any gram of silver that stands the test of scrutiny can be sold in exchange for hard cash any time of the day.
Also, unlike currency which can be created or printed, silver cannot just be created out of an agreement. It is a rare metal and that is what grants it, its novelty. It is globally accepted and does not have the limitations of the currency system.
Even if you consider silver ETFs, certificates or futures & options, those are also liquid to a certain extent, but may not carry the same flexibility in transactions as they are dependent on an exchange for sale and purchase.
3. Affordable Investment
The price ratio of silver to gold is approximately 50:1. This makes silver the cheapest investment in the precious metal category. Moreover, it has the potential to secure you against crisis just as well as gold.
Anyone can invest in silver and therefore it is a go to option for most retail investors. If you are unable to buy gold, silver is the next best option. Also, due to its industrial applications not only can it be transferred in the form of coins, but also gifting someone silver ware or jewellery is as good as handing them a physical asset.
4. More Practical for Short-Term Disinvestment
When your requirements are small and by selling only a part of your investments the urgency will be met, at such times silver comes in handy.
As silver is available in smaller denominations selling a few grams of silver is always better than selling your gold to meet the short term requirements.
Silver can be a perfect partner for your gold investments as during a shorter run you would not need to liquidate you gold.
Like gold the silver bullion has world-wide acceptance and can be sold virtually anywhere on the planet.
5. Boost in Performance in a Bullish Market
Being a small market a relatively small movement of money in the silver market can have a deep impact on the overall price of the metal. This degree of price change is rare in the gold market as the same would require substantial amount of off-loading or purchase at the exchange level.
This means that in a bullish market the prices of silver would soar much faster than gold and the investors can derive visible advantage from trading in the metal. Conversely, in a bearish market when the prices tumble, it poses as a good opportunity for buyers to purchase and existing investors to off-set their losses.
6. Reducing in Silver Inventories Around the World
Except for the USA, India, and Mexico none of the countries are maintaining inventories for silver. Traditionally, Governments around the world held inventories of silver, as coinage for the currency system was dependent on silver. Today, most coins are not made from silver and therefore countries choose not to stock pile silver.
On the other hand the usage of silver in the industrial sector has increased. Moreover, being a rare metal the future prospects of silver are positive, as in the event the future silver needs of the industrial sector are difficult to meet, most Governments would not be able to buttress the shortfall and would have to depend on the silver market for supply of the required silver.
7. Increase in Industrial Application
Silver is used in almost all products of daily use. Due to its electricity and thermal conductivity and reflective properties, silver is used by for manufacturing electronics, solar panels, and batteries and even in medications.
Owing to its industrial applications the demand for silver has skyrocketed during the recent years. More so, today, more than half of the demand for silver comes from the manufacturing industries.
Some of the notable products, today, where silver is used are- cell phones, self-heating windshields and photovoltaic cells of solar panels.
A portion of the silver used in the industry is destroyed at the fabrication stage for most of the products and being a rare metal this silver is lost for ever, which is a growing concern.
8. Less Supply in the Future
Due to the crash in silver prices in the resent years, especially after 2011, miners have reduced their exploration efforts in other to cut costs, which mean less silver is being mined.
Considering that the demand for silver will stay the same, soon the market supply will be unable to meet the needs of the buyers. As a result there will be a shortage of silver supply in the market, which will mean a better rate of return on investment for early investors.
9. Growth in Demand World-Wide
The retail demand for silver is surging world-wide. India and China are the countries that have experienced the most demand in silver. Both the countries have a long history in dealing with precious metals. This demand will continue to grow with the growth in their populous.
Also, the creation of different investment vehicles including ETFs and ETNs is attracting the mellenials to invest in the metal.
In India along with the demand for silver there has been a substantial growth in the silver jewellery sector.
10. Gold Vs Silver
The silver to gold ratio of 50:1 is in itself an indicator of which metal is a better buy at any given point of time.
In a country like India, silver is becoming the darling metal, as it is cheap and sturdy and has the most intricate jewellery design applications. In the Indian market, silver is available in all forms that suit the occasion and needs of the buyer. For instance, the divine silver statue of a deity, silver ware for wedding gifts, bangles, bracelets, chains, pendants and coins.
Silver is a one of kind asset that has the greatest distortion between price and fundamentals. Not only is it a good security in times of crisis but also a perfect investment bet.
Now-a-days there are many investment channels through which one can derive the price advantage from the volatile silver market. But as a consumer you must understand that deriving the advantage from the market fluctuations of silver and holding silver as an asset are two different things.
For instance, most mutual funds do not hold silver as a physical asset. Typically precious metal funds have more exposure into gold or gold mining companies rather than silver.
If you are looking for paper investment in silver you will have to opt for silver ETFs which are quite rare in India.
A Word of Caution
Like all mutual funds and investment schemes you must be well aware of what you are investing in. Investment should not be done, especially in the equity market, when you do not understand a particular instrument or scheme.
Silver is a highly speculative market and you should never invest for your short term needs or as a short term strategy.
Also, investing all your money in one precious metal is not advisable. Investment in precious metals must be used as a diversification tool in your investment portfolio.