A silver investment can begin with the
purchase of a single bar or coin. Where it's from, the design, even the
shape doesn't matter. Although counterfeits exist, if it says, ".999
Silver" and "One Troy Ounce," you are almost certainly purchasing the
real thing. Unlike other investments, this one can come home with you,
can be held, can be looked at, and may travel to foreign countries and
redeemed for its full value.
Coin Shops
When you walk into a coin shop, you are
surrounded by collectible merchandise of all kinds. Rare items will
litter the cases, individually priced and marked up for a hefty profit.
Ask the owner to see the "silver rounds." A "round" is another word for
a generic coin. If he has any in stock, he will direct you to the case
where the items are priced slightly higher than the market price for the
metal.
They may not have any silver on hand.
Shops get their products from people who come in to sell them. You could
be out of luck if no one has sold to them recently. Furthermore, if the
market looks volatile, an owner might sell to larger national dealers,
or they may sell it to industry, whose demands are typically much
greater than those of investors.
Types of Coins
Assuming the shop has items available,
they will be broken down into two categories: 1) generic rounds, and 2)
numismatic coins.
- Generic rounds are the preferred
item of choice for investment purchases. You are paying for the
silver, not the design or collector's value of the item. This value
is dependent directly on the market price of the metal.
- A numismatic coin like the
American Eagle is considered to have collector value. This value is
subjective, and while it is a .999 one troy ounce coin, it is worth
more than a generic round. The trouble is that a) that value is very
tough to pin down, and b) when sold, you need to find a buyer that
is willing to pay that amount. A generic round is far easier to sell
at a market price that is universally known.
Bullion Bars
In addition to coins, silver may be purchased as bars. One ounce bars
may be found alongside generic rounds, and from an investment
standpoint, are exactly the same. Some people prefer bars simply for
aesthetic reasons.
When purchasing more than one ounce at
a time, rounds can be purchased in rolls, or larger bars may be
purchased. Again, you will have some success finding these quantities at
the local coin shop. Bars typically appear in denominations of one
ounce, ten ounces, 100 ounces, or 1000 ounces.
Purchasing Large Amounts
For the serious investor, purchasing
$1,000 or more generally requires a national dealer. A search on the
internet or in the phone book will turn up many to choose from. Dealers
will take bank wires, checks and occasionally credit cards and deliver
your order to your doorstep. Some allow you to pick your order up
directly from their warehouse if you are lucky enough to live near one.
Shortages
It is not unheard of for even the large
national dealers to run out of silver temporarily. The metal has many
uses ranging from the computer industry to health care. It is the most
conductive metal that exists making it suitable for many electronic
applications. When industrial demands run high, very little is left for
the investment world.
For this reason, a sudden demand from
investors can cause shortages from dealers. Dealers may still take
orders, but will not promise shipping for weeks or months. Even worse,
they may begin charging a premium to compensate for the high demand,
driving the price to 15%-60% more than the market price. Yet, the
industrial demand may be steady during periods of high investment
demand, keeping the overall spot price unchanged, or even seeing it
fall.
Selling
Coin shops again serve as the
marketplace when you are ready to sell. They typically will buy at the
market price, or slightly lower, usually within 5% of the market price.
Occasionally, when investment demand is high, they may give you more
than market price.
The same rules apply to the larger
dealers. In times of shortage, they will buy through any means necessary
including private investors like you. For large quantities, the large
dealers likely will pay more than the smaller local shops.
Another option is to sell the through
an auction such as eBay. Auction sites tend to give back very good
returns and may well beat the price of your local dealer, especially if
they do not have competition in your area.
Storage
Like any investment, care should be
taken to secure your assets. Think of the metal like a stock
certificate. You probably wouldn't leave it lying around the kitchen
table with other papers. You'd have it in a safe somewhere. You might
consider storage and security as part of your investment. Spend 1% of
the value on storage and this will give you a safety deposit box in a
bank for your $500 of bullion. As with anything of value, secrecy
certainly plays a part in security.
Silver will tarnish when exposed to
air. Sulfur causes the metal to turn yellow, then black, and air
contains sulfur, especially near areas with high automobile traffic.
This does not affect the value of investment rounds or bars, providing
that they are not considered numismatic or collectible. For collectible
items, this will certainly have an impact on value as a discoloration
will impact the aesthetics of the object. Store your bullion in an
air-tight container if possible, but don't worry about it too much if
you don't have numismatic coins. Discoloration will not affect the value
of these items, unless you will be selling to the general public through
channels like eBay where the public may pay more for a "pretty" item
rather than one that is tarnished. Even in this case, tarnishing will
only slightly affect the value.
Hidden Benefits
- Can be sold anywhere in the world.
It is not tied to one specific nation's currency, so it can be taken
out of the U.S. and brought to a local dealer or even banks in many
countries. Again, the value comes from the material, not because it
has a nation's emblem or amount labeled on it.
- Portable enough that great amounts
of wealth can be transported in a briefcase, a suitcase, a trunk, or
a bag.
- Aesthetically pleasing. Many
investors get hooked on the metal itself because of it's luster,
it's weight, and the pleasing logos or designs created by the mints
that produce the end product. Holding the metal in your hands can
become somewhat intoxicating and may increase the desire to invest
more and more hard-earned cash to obtain it.
- Not tied to the dollar. The metal
was once tied to the dollar. A one dollar bill in the U.S.
once represented a piece of metal in a vault like at Fort Knox (and
said so right on the bill). But the Federal Reserve did away with
this "restriction" in 1971 in a decision called the "Nixon Shock."
Now if the dollar crashes, precious metals still retain their full
value.
- It is disappearing. World industry
is finding new uses for the most electrically conductive, the most
heat conductive, and the most reflective metal every single day.
Photography, electronics, and the medical industry are using the
metal at a rate never before seen in history. Much that is used in
industry is gone. It is not recycled. It is not recoverable. It is
used up and gone forever.
Conclusion
Buying silver is rewarding, practical, and satisfying, is one of the
oldest forms of investment, has passed the test of time, and continues
to thrive in an environment that finds new industrial uses every day. As
the supply runs short in the world, the value continues to rise.
Starting a silver investment creates real wealth in your possession to
compliment, or take the place of, investments represented by pieces of
paper.
