Finding The Best Way To Invest In Silver
Precious metals are a hot topic these days and many people are looking for the best way to invest in silver not to mention gold and platinum. I have invested in the silver market using several different methods which you may find useful. Since I’m from Canada one method I’ll be covering is using your TFSA which is a tax free savings account, if you are from another country you may need to research a similar account. Not to worry, one or more of these methods will be right for you no matter where you are from.
Whether you have very little money, a little money or a considerable amount of money one of these methods should perk your interest. We’ll cover buying and holding physical silver, using a pool account online to purchase silver, using your TFSA to purchase silver and even look a little at buying junk silver so let’s get going!
Buying And Holding Physical Silver
If you’ve never purchased silver there are a few things you should be aware of, first of all one great thing about silver bullion is that it can be purchased in large or small quantities so if you don’t have a great deal of money to get started silver is an excellent option.
Should I Invest In Silver
Many people around the world are asking themselves Should I Invest In Silver? Well the current price of silver is $31.59 so there’s still lots of time to get into the silver market and I believe that silver is still well undervalued. Many pundits are predicting $100 to $150 silver in the next 12 to 18 months, I don’t know what silver will rise to but I personally believe you can see it double over the next year or two. I believe you should consider it a mid to long term investment although I do know people who trade in and out of their pool accounts on a weekly to monthly basis with success.
How To Invest In Silver Bullion
There are a many ways to invest in silver, buying and holding physical bullion is the first one we’ll look at. The first thing you need to do is find a reputable refiner or dealer that sells all denominations of silver bullion be it 1, 5, 10 or 100 ounce bars, Silver Maples or Silver Eagles. You need to understand that all bullion dealers will have a bar charge. So what is a bar charge? A bar charge is the amount over spot price that the dealer will charge you for the bar.
Bar charges are different for different size bar and different dealers will have slightly different bar charges. The larger the bar or amount of silver that you purchase the less the dealer should charge you per ounce as a bar charge. For example, lets say you purchase 1 x 1 ounce bar, a likely scenario is that you will pay today’s silver spot price $31.59 + a bar charge of $4-$5 depending or who you deal will, the result is you may pay anywhere from $35.59 to $36.59 for your 1 ounce bar of silver. T
Now let’s say you purchase 1 x 50 ounce bar, you will likely pay anywhere from $3-$4 per ounce as a bar charge. Let’s say you purchase 1 x 100 ounce bar, you will likely pay anywhere from $2-$3 per ounce as a bar charge. The point I am trying to make is the more you buy the smaller your bar charge should be so it is worthwhile contacting several sources and asking them what their bar charges are so you can get the best deal possible.
If you decide to purchase Silver Maples or Silver Eagles you will likely pay slightly higher prices as a bar charge, Maples and Eagles are thought to be a more prestigious way to hold silver, personally I go for the cheaper option of bars and I am not particular who has made the bar be it JM (Johnson Matthey), Pan American, Englehard or any other recognized refinery.
Using A Pool Account To Invest In Silver
Another method I have used is opening a ‘Pool Account’. What is a Pool Account? A pool account is what is referred to as an unallocated account meaning you as the client own a share or piece of a pool of silver held by whatever company you have opened your pool account with. You do not need to take physical possession of your metal and in fact it is cheaper for you not to but you may choose to have it delivered to you for an extra charge, shipping fees and insurance would be additional if you decide to take physical possession of your metals.
Pool accounts can be any type of precious metal, you can purchase silver, gold, palladium, platinum or rhodium if you wish. There are many companies offering pool accounts, you need to do your own research and determine who you are most comfortable with, personally I have used a Kitco pool account and found them to be honest and efficient, I believe they currently require a minimum $2,500.00 at this time.
Some benefits of a pool account are:
- You can buy and sell into and out of your pool account 24hrs a day.
- You can take possession of your metals in the future if you wish.
- You don’t need to worry about storing your metals as they do it for you.
- You don’t need a lot of specialized knowledge to open and deal within a pool account.
- The biggest drawback is as with all things there is a cost. The cost somewhat like a bar charge but is better explained as a spread. For example today’s spot price is $31.59, to buy 1 ounce silver in Kitco pool account today would cost $32.19 so they are charging 1.8% as a premium to buy into their pool account.
If you were selling 1 ounce of silver from your pool account today with the spot price at $31.59 you would get $31.20 per ounce or 98% of spot price. As you can see the charges from Kitco’s pool account are quite reasonable, I like pool accounts but some people are cautious of them for some reason, I believe it’s the world of the unknown to them. If you do decide to go with a pool account just make sure it’s with a reputable company and you will be fine.
Using Your TFSA To Invest In Silver
A Tax Free Savings Account is another excellent way to invest in silver if you are from Canada, I don’t know if other countries offer this benefit to their citizens if you are not from Canada you should find out. A TFSA is a vehicle which allows Canadian to invest without having to pay taxes on your gains. Currently you are allowed to put $5,000.00 per year into your TFSA.
The TFSA was brought into place in 2008, it is now 2012 so if you have never opened a TFSA you would be allowed to put a total of $20,000.00 into it. I have found two companies that are working in conjunction with each other to help Canadians put precious metals and specifically silver into their TFSA. Cache Metals works with Laurentian Bank to set up your TFSA and allow you to purchase silver bullion within it.
There are a few requirements you need to know about, first Larentian Bank has a minimum 500 ounce purchase for your TFSA, secondly they do charge a fairly heavy charge per ounce at $3.75 per ounce considering you are purchasing 500 ounces. Other fees you should be aware of is that you will be charge 1.5 cents per month per ounce for storage, this works out to $94.00 per year so I think that’s a pretty good deal.
Even though their bar charge is fairly high I still believe this is a great way to invest in silver for the long term and legally avoid paying taxes on your gains, look into it if you have the funds available.
Buying Junk Or Coin Silver
Junk or coin silver is another form of silver you can purchase. Junk silver typcially are called ‘Junk Silver Bags’ and consist of pre-circulated US coinage dated 1964 and older. The coinage can consist of dollar, half dollar, quarters and dimes. Sold in $100, $500 and $1000 bags this is another great way to get into the silver market with a low mark up.
For example a $100 junk silver bag weighs 79.5 ounces and at 90% actual silver content you are getting 71.55 ounces of actual silver content. The current price for a $100 junk silver bag at Kitco is $2,552.30 so in theory you are paying $35.67 per ounce with the current spot price of silver being $31.59. From those number you can see you are paying $4.08 over spot price. This is a reasonable price but from my experience when you want to sell your junk silver you will have a hard time finding someone who will pay you as high a percentage when compared to bullion or your pool account.
So Why Invest In Silver
In conclusion you can see there are a number of ways you can invest in silver be it purchase small or large amount of bullion, using a pool account, using a TFSA or retire savings plan or buying Junk silver for the future. Whichever way you choose it is my belief you will do well in the long run.
My personal preference is to stick to purchase regular silver bars when purchasing physical silver. I believe that pool accounts like Kitco offer are also a good online means of buying silver, and if you are in Canada and you have the funds available buying silver in your TFSA is a no brainer.
So what is the best way to invest in silver? The answer is it’s up to you, everyone has their own opinion on which is best but ultimately it comes down to your risk tolerance and personal preferences, whatever you decide be sure to do your homework, familiarize yourself with the different methods and do some research to secure the best price you can.
If you have any questions or have another silver investing method please let me know and I’ll be happy to add it to our resources, good luck in your future investments!