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Is Silver a Good Investment?

Is Silver a Good Investment?

Last updated on: July 13, 2012 at 8:00 am by Timothy Artisan

Is Silver a Good Investment? 2012-07-13T08:00:50-05:00 Timothy Artisan

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Investors are beginning to find they like having control over their investments. In the wake of the Great Recession, many of the large banks have been unable to repair the broken trust between themselves and their former investors. These investors are finding ways to take control by using the vast amounts of information available over the Internet. One of the questions being researched: is Silver a good investment?

With this great power comes great responsibility. Investors must be responsible for their choices if they are to take this kind of control in their financial lives. Also with this responsibility comes fear, a fear that tempers the speculative spirit. Most investors are looking for a safe investment that is also a good investment.

Silver Investment: Risky?

Silver, like all investments, involves risk. With paper assets, you are in a constant battle with inflation. With paper assets, such as stocks, you are constantly hoping that the CEO at the top of the company makes responsible decisions that won’t put your investment at risk.

Similarly, Silver has risks, some of which are different. Common risks include speculation. Plenty of stocks experience speculation, but silver also experiences speculation. There was a fair amount of speculation when Nelson Bunker Hunt attempted to corner the Silver market in the 1980s, dubbed Silver Thursday.

Silver also has the added inconvenience of being less liquid. Being able to manage the liquidity of silver is probably one of the most underrated skills in silver investment. With stocks, if the price begins to plummet, you can sell portions on the way down easily, and buy on the way back up easily as well. Silver requires much more planning. In some instances, it might be better to sell portions when the silver price quotes are going up, but appreciating at a slower rate than it has been.

The slower rate of price increase could be an indicator that the increase is about to tail off and start going down. You don’t need to be an investment wizard, but you can’t necessarily apply your stock investing fundamentals to Silver investing because liquidity is a huge factor in market timing.

Silver Investment: Safe?

Traditionally, one of the safest investments to hedge against a recessionary period has been silver and gold. Because of the finite nature of the resource, silver and other precious metals have always held a more steady exchange rate that is much less susceptible to the short-term emotional reactions of the marketplace.

Silver has also been used as a hedge against inflation. Because of the very practical nature of precious metals, the price of silver will generally attend the overall price of goods in total. With silver, it is very unlikely that you will ever lose a great deal of money unless you purchase the investment at a substantial premium to the current market rate, and sell at a poor time (realizing your losses).

However, investors in control of their entire portfolio can hardly afford to have a basket of investments that simply holds value. Although silver is a safe investment a vast majority of the time, the modern investor also wants to know if silver is a good investment.

Silver, A Good Investment

In order to be a good investment, there is usually some growth aspect that is necessary. Simply maintaining value with inflation is not good enough for a retirement package – people need some extra money to retire on. However, silver has been shown to be an investment that can handle this challenge if the investment is properly managed.

Silver is able to outpace inflation and cost of living expenditures because of its finite nature, meaning that it will gradually become more valuable over time as people buy up more of the resource, leaving less total silver in the world to be purchased or used.

Silver is being used in more-and-more technology as we make advances. Originally, silver was primarily used in industrial processes, but silver is now being used for many more medical purposes such as bandages as well because of its antimicrobial properties. Because of this, Samsung’s silver nano technology is even being implemented in refrigerators and other household appliances to help prevent bacterial growth.

This means that the old buy-and-hold strategy may actually work for an investor that does not want to actively manage the investment portfolio, although the results are never guaranteed and they will not be as good as an investor who learns a few of the basic premises of true portfolio management.

Making Silver a Better Investment

Some of the basic management techniques that you can learn to make your silver investment even better are as follows:

One – You make your money on the purchase, not on the sale.

In order to give yourself the best chance for maximum profit on an investment like silver, look for opportunities to buy it from individuals rather than retail stores, a strategy known as “buying below spot price.” Retail stores will always attempt to charge you a premium and will not negotiate on their prices, which will always be above market value.

Two – Take profits. Do not get greedy.

Silver has had some great run ups in the recent past, but many people were not able to realize the benefit of their smart investment because they did not sell. Remember that value on paper is only that until you actually sell the investment.

Three – Buy over extended periods.

Over time, the price of any investment tends to level off. If you purchase silver at known intervals over a long period of time when the price is lower, your average purchase price will be lower, giving you more opportunity to profit. This is also known as “averaging down.”

Four – Sell back to individuals, not to resellers.

Put simply, resellers will never pay as much for silver as an individual will. Selling to resellers is a great way to liquidate quickly, but there is a high cost to using this method.