How to invest in silver: 5 ways to buy and sell it

Last updated on January 28, 2023, and last reviewed by an expert on January 12, 2022.

Precious metals such as silver have long been an alternative to traditional investments such as stock and bonds. When times get tough or it looks like the Federal Reserve is actively engaged in printing money, some investors turn to silver to hedge their bets or to invest more defensively.

Investors like silver for many reasons, but many see it as a store of value in uncertain times, while others see silver and other precious metals such as gold as protection against inflation. For this latter group, investing in silver is a way to be sure that they have a currency that can’t be inflated away by money printing or persistently near-zero interest rates.

There are a number of ways to invest in silver, from owning it outright to owning shares in companies who produce it. Here are five of the best ways to invest in silver.

5 ways to buy and sell silver

Each of the ways to invest in silver comes with its own risks and rewards.

1. Coins or bullion

Owning physical silver, either as coins or bullion, is a psychologically and emotionally satisfying way to invest in silver. You have possession of it and can use it, if necessary. And in some cases, it’s actually relatively easy to access. For example, U.S. coins made before 1964 contain about 90 percent silver, and you can purchase them at the value of their silver content.

If the price of silver rises, you can make a profit on silver coins and bullion, but that’s the only way you’ll make money here, since the physical commodity does not produce cash flow, unlike a quality business.

You can purchase silver through local dealers and pawn shops or online dealers such as APMEX or JM Bullion. More specialized dealers allow you to purchase whole bars rather than just coins.

Risks: It can be easy to overpay for physical silver, so be sure to note the spot price to ensure that you’re getting a fair price. Similarly, if you need cash in a hurry, you may not be able to get the full value for your physical silver, especially if you need to go through a dealer.

Watch out if you’re buying collectible coins, since you’ll likely pay extra for the collectibility of the coin, meaning that you’re overpaying for the actual silver content. Finally, like all physical assets, silver is subject to theft, so you’ll have to safeguard it and maybe even insure it.

2. Silver futures

Silver futures are an easy way to wager on the rising or falling price of silver without any of the hassles of owning physical silver. You could even take physical delivery of the silver, though that’s not the typical motivation of those speculating in the futures markets.

Silver futures are an attractive way to play the silver market because of the high amount of leverage available in futures contracts. In other words, you have to put up relatively little capital to own a relatively large position in the metal. If silver futures move in the right direction, you’ll make a lot of money very quickly, though you can lose it just as quickly if you’re wrong.

Risks: The leverage in future contracts works both ways, meaning it magnifies your gains and your losses. If the market moves against you, you’ll have to put up more money to hold the position. And if you can’t, the broker will close out the position and you’ll be stuck with a loss.

3. ETFs that own silver

If you don’t want to own physical silver directly but also want a lower-risk method than futures, you can buy an exchange-traded fund (ETF) that owns physical silver. You’ll have the potential reward for owning silver if the price rises, but fewer risks such as theft. An ETF that owns physical silver will deliver the return of silver prices minus the ETF’s expense ratio.

ETFs offer another advantage, too. You’ll be able to sell your silver at the market price, and the funds are highly liquid. So you’ll be able to sell your funds at what’s likely the best price, and you can do so on any day the stock market is open.

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The two main ETFs owning physical silver are iShares Silver Trust (SLV) and Aberdeen Standard Physical Silver Shares ETF (SIVR). Traders can also wager on the silver market via an ETF that owns futures contracts through ProShares Ultra Silver (AGQ), though it’s better as a short-term bet than a long-term hold, because of how the fund is structured.

Risks: Like gold and other commodities, silver can be volatile, especially over short periods. But with an ETF you’ll be able to dodge some of the bigger risks of owning physical silver yourself, namely the risk of theft, the illiquidity and the poor pricing when it’s time to trade.

4. Silver mining stocks

You can also take advantage of a rising silver market by owning the stocks of companies that mine the metal.

By owning a miner you can benefit in two ways. First, if the price of silver rises, the company’s earnings should rise along with it. In fact, silver miners’ profits will rise faster than the price of silver, all else equal. Second, the miner can raise production over time, also increasing its profits. That’s an extra way to win with silver, over and above just betting on the price itself.

Risks: Any time you invest in an individual company, you need to do extensive analysis on it, to be sure that you’re buying a high-quality company that can succeed. Many miners are risky outfits, and some have yet to dig a hole in the ground, let alone mine silver from it. Plus, because their profits depend on the volatile price of silver, mining stocks can be volatile, too.

5. ETFs that own silver miners

If you’re not looking to do a lot of analysis on silver miners but still want the advantages of owning a mining company, you can turn to an ETF that owns silver miners. You’ll get diversified exposure to miners and lower risk than owning one or two individual mining stocks.

Three ETFs are classified as silver miners, according to ETF Database: Global X Silver Miners ETF (SIL), iShares MSCI Global Silver Miners ETF (SLVP) and ETFMG Prime Junior Silver Miners ETF (SILJ).

Risks: A sector ETF reduces the costs of any single miner doing poorly, but anything that hits the whole industry, such as a falling price of silver, will likely ding the fund significantly. And pay close attention to what’s in those funds, since they’re not all created equal. Some may offer more exposure to higher-quality companies, while others focus more on riskier junior miners.

Is silver a good investment?

Investors like silver for many of the same reasons that they like gold and precious metals more generally. Here are some of the most important reasons:

Returns: Over certain periods of time silver has outperformed highly regarded asset classes such as stocks.
A store of value: Silver can hold its value and even gain over time, providing a way for investors to generate profits.
Liquidity: Silver is generally a liquid market, and if you’re buying certain kinds of silver assets, they’re highly liquid.
Less correlated to asset markets: Part of silver’s appeal is that it’s less correlated to other markets such as stocks, meaning it can act as a hedge against those markets.
Diversification: Because it’s less correlated, silver can act as a way to diversify a portfolio, reducing risks and potentially increasing returns.

Of course, silver is not without risks or drawbacks.

Silver itself does not produce cash flow, so it may not be clear when it’s a good time to buy. That’s in contrast to stocks, where the underlying company may be cheap based on its earnings or future prospects.

When should you invest in silver?

Investors can consider investing in silver in a variety of scenarios:

Supply and demand are out of touch: If the supply of silver is not keeping up with demand, it may cause the price of silver to rise.
An attractively priced company becomes available: If you find a company that’s ramping up production or is able to take advantage of rising silver prices, it could be a good time to buy.
You need a hedge against inflation: Some investors turn to commodities such as silver as a way to hedge against inflation
You want to hedge your portfolio: If you have significant exposure to rising silver prices in your portfolio (for example, silver is a major input for your businesses), you could buy silver and help offset that exposure.
You want to add commodities to your portfolio: Silver can be part of an allocation to commodities in your portfolio, helping to diversify your holdings and lower your risk.

While adding silver to your portfolio can be a useful strategy for more advanced investors, beginners may be better-served by building a well-rounded portfolio made up of the best investments.

The bottom line

Investing in silver is not a good fit for everyone, and some investors prefer to focus on cash-flowing businesses rather than invest in the metal itself. Investors in businesses have multiple ways to win, and it’s why superinvestors such as Warren Buffett prefer businesses over commodities.

It’s easier and less costly to own stocks or ETFs than physical silver, even as they’re more liquid than the actual shiny stuff. Still, owning bullion means you have no counterparty risk (with an exchange or a company, for instance), though the investment relies only on you for safekeeping.