What are the pros and cons of owning silver bullion? With tension ramping up worldwide now may be the time for investors to enter the market.
Each investment product has pros and cons, and what’s appealing to one investor may not be a good choice for another.
Silver is having an underwhelming year again, this time alongside gold, and many investors are now wondering whether silver bullion is worth holding. The white metal can be volatile, and some have concerns about that as well.
However, precious metals like silver and gold are also seen as a safety net — as safe-haven assets they can act as protection for investors in times of uncertainty. With tensions running high around the world, they could be a good choice for those looking to preserve their wealth in these difficult times.
With all of those factors in mind, let’s take a look at the pros and cons of holding silver bullion. Tell us at the end whether you’d buy this precious commodity.
Pros of owning silver bullion
1. Silver can offer protection — As mentioned, investors often flock to precious metals during times of turmoil. When political and economic uncertainty are rife, currencies tend to take a backseat to assets like gold and silver. While silver bullion tends to get overlooked in favor of gold, it has the same role.
2. It’s tangible money — While cash, stocks, bonds and other financial products are accepted forms of wealth, they are essentially still digital promissory notes. For that reason, they are all vulnerable to depreciation due to actions like printing money. Silver bullion, on the other hand, is a tangible asset that is real and finite. That means although it is vulnerable to market fluctuations like other commodities, silver isn’t likely to completely crash because of its inherent and real value.
Chris Duane, an investor and YouTube figure, has said he puts his metal where is mouth is by liquidating his assets and putting the money into silver bullion when prices get low. Duane believes that our money system, and indeed our entire way of life, is built on unsustainable debt. In his opinion, the purpose of investing in silver bullion is to take yourself out of the mathematically inevitable collapse of that system.
3. It’s cheaper than gold — Silver bullion is not only cheaper than gold, and therefore more accessible to buy, but it’s also more versatile to spend. That means if you are wanting to use your coins as currency they’re easier to break than gold because they are lower in value. Just as a $100 bill can be a challenge to break at the shops, divvying up an ounce of gold can be a challenge. As a result, silver bullion is more practical and versatile than physical gold.
4. Silver offers higher returns than gold — Because silver bullion is worth around 1/79th the price of gold, it is affordable and stands to see a much a bigger percentage gain when silver prices go up. In fact, in the past, silver has outperformed gold in bull markets, according to GoldSilver. GoldSilver claims that from 2008 to 2011 silver gained 448 percent, while gold gained just 166 percent in that same time period.
5. History is on silver’s side — Silver and gold have been used for currency for hundreds and hundreds of years, and that lineage lends the metal a sense of stability. Many find comfort in knowing that this metal has been recognized for its value throughout a great deal of mankind’s history, and so there’s an expectation that it will endure while fiat currencies may fall to the wayside.
6. Silver offers anonymity — Whether you value your privacy or not, silver has the same benefit of cash in that it gives users a degree of anonymity with regards to spending. Not everyone wants all of their transactions to be a part of the public record, and privacy is a necessary component of democracy, according to Glenn Greenwald’s TED Talk. That is another benefit of the white metal.
Cons of owning silver bullion
1. Lack of liquidity — The price of silver can go down at any point in time, just like any other investment, and the ability to sell in a hurry can be an issue. In a jam, pawn shops and jewellers are an option, but not necessarily the best-paying one.
2. Danger of theft — Unlike most other investments, such as stocks, holding silver bullion can leave investors vulnerable to theft. Securing your assets from looting may incur other costs, including a safety deposit box in a bank, or a safe box in your home. Additionally, the more physical assets that reside within your home, the more risk you are at for burglary.
3. Weak return on investment — Although silver bullion may be a good safe-haven asset, it may not perform as well as other investments — for example, real estate or even other metals. We’ve seen prices for metals like cobalt and lithium surge in the last year due to rising demand for electric vehicles, and these gains far outweigh those of silver in recent years.
Stocks may also be a better option than silver bullion for some investors. As Randy Smallwood, president and CEO of streaming company Wheaton Precious Metals (TSX:WPM,NYSE:WPM), has said, “streaming companies will always outperform bullion by itself.” He attributes this to organic growth and dividend payouts that bullion doesn’t provide.
With all of these factors in mind, investors may want to reflect on the pros and cons from their own personal lens before deciding whether to build up their stockpile of silver bullion. Timing is also an important factor for those who want to reap the benefits of the white metal.
Would you invest in silver bullion? Why or why not? Tell us in the comments.
This is an updated version of an article originally published by the Investing News Network in 2016.
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Securities Disclosure: I, Amanda Kay, hold no direct investment interest in any company mentioned in this article.