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While silver’s purposes have changed throughout history, it remains a valuable commodity with a strong demand in the market. Demand for precious metals generally increases in times of economic uncertainty, often correlating with a decrease in the US dollar’s value. Before investing in silver in Canada, learn the strategies and risks of buying silver.
Unlike gold, silver has demand that extends beyond jewelry, coins and bars. Because it’s also the best conductor of electricity and boasts anti-bacterial properties, silver is also used heavily in batteries, solar panels, electronics, dentistry and medicine.
What’s the best way to invest in silver in Canada? Here are 4 ways you can add silver to your investment portfolio.
Rather than trust your money to the stock of 1 or 2 companies, exchange-traded funds — or ETFs — offer the chance to invest in a basket of assets.
Compared to other popular investment methods, ETFs are simple and accessible. You can buy or sell them like stocks, but the diverse range of assets within them mean less vulnerability to market fluctuations.
Many ETFs are a safe option for newcomers to precious metals. The broad scope of different companies in silver ETFs mean you can focus either on the metal itself, on silver miners — or on both. The iShares Silver Trust (SLV), for example, tracks the spot price of silver by owning physical silver bullion, while the Global X Silver Miners ETF (SIL) tracks an index of silver mining companies.
Leveraged trading, also known as margin trading, is when you borrow credit from a broker so you can take a much larger position on a stock. This means that potential wins are magnified — but so are losses.
These ETFs aim to double or triple the returns of regular ETFs and are invested in more risky futures and options in order to achieve those higher returns. In order to consistently achieve those goals, leveraged ETFs are re-balanced daily, and in times of high volatility, there can be an erosion of value for shareholders who simply hold them. Leveraged ETFs aren’t designed for buying and holding, so it’s a good idea to exercise caution when leverage trading.
If a regular silver mining ETF drops 5%, the 3x leveraged silver mining ETF is designed to fall 15%. So if that 15% fall takes the price from $10 to $8.50, the daily re-balancing will reduce the exposure based on the new asset total so a rebound of the same strength will achieve less than a 15% increase — not to mention that even if the leveraged ETF rebounded 15%, its new $9.78 price would still fall short of where it started the previous day. For this reason, leveraged ETFs should be used only for short-term trades, not long-term investments.
Investing in stocks is a well-known method for approaching the market.
Silver has many modern uses, which makes it a desirable asset in multiple industries that include solar energy and electronics — and a popular commodity for investment. Many silver mining and manufacturing companies like First Majestic Silver (AG) and Wheaton Precious Metals (WPM) offer stock for purchase through online brokerage platforms and advisers.
While not as convenient as investing in silver stocks or ETFs, you can also invest in physical silver. Ranging from 1 ounce to 5 or more kilograms, coins or bullion can be purchased or sold on your own terms from a local dealer or online.
Despite gaining full control over the asset, physical silver is a longer-term investment. Unlike buying and selling stocks or ETFs, where the only cost is the price, there are 3 factors that go into the final amount you’ll pay for physical silver.
For investors looking to own silver at the lowest cost, junk silver generally comes with the smallest premium. Junk silver is the name for the US dollar, half-dollar, quarter, dime and nickel coins that were minted in 1964 or earlier. The silver content of these coins is typically 90%. Common junk silver coins include the Roosevelt dimes, Washington quarters, Franklin half-dollars and peace dollars.
Futures trading is much more advanced than stock and ETF trading, and in fact there are many brokerage accounts that do not offer futures trading, so if you’re interested in trading silver futures, make sure you select a brokerage account that offers it.
When you invest in futures, you agree to buy stocks in a commodity at a set price, which you then receive sometime in the future. The idea is that you end up buying stocks at a lower cost than prices would allow otherwise, but success heavily depends on market movements.
Their vulnerability to market volatility makes futures risky. Some luck and a strong understanding of the futures market can reap large returns, but you can also lose money if you’re new to silver investing. And if you don’t roll over your futures contract before it expires, you could be stuck purchasing actual silver.
Silver is a staple material for many modern industries, allowing you a number of routes for investing in it. But watch for inevitable risks:
You can invest in silver through options available to most commodities, including the purchase of silver coins and bullion itself. But be wary of fraudulent dealers when purchasing physical silver, and understand the potential for market fluctuations before investing in futures.
Not sure silver is the right shiny addition to your portfolio? Compare your investing options across trading platforms and commodities to find the best fit with your budget, goals and tolerance for risk.
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