Updated on 02/07/17
Owning silver could change your life.
That’s because the next precious metals bull market is long overdue. When the metals market turns around—and it will—silver will likely outperform gold. Given silver’s current low price, the profits could be enormous.
All silver products will benefit when the silver price heads higher. But you want to maximize your profit. To do that, you must buy and sell at the best price, and be able to do so when you need to.
You can achieve all these goals by selecting the right place to buy silver. Sounds easy, but it’s not.
This guide covers all the sources where the average investor can buy silver. Before you decide where to buy, you must first decide what to buy. So let’s start by looking at which form of physical silver is better for an investment…
Owning physical silver has many advantages over paper substitutes. It’s a hard asset that is private, portable, forever-lasting, and carries no counterparty or default risk.
The question is whether you should buy silver bars or coins? Here’s a quick look at the pros and cons for each:
|Bars||Lower premiums than coins. The larger the bar, the lower the premium. Ideal for large holdings. Bars may have greater availability during a crisis.||Bars over 100 ounces could require an assay to sell. Less attractive than coins.|
|Coins||Coin designs add visual appeal. May be more attractive to potential buyers. Will not require an assay to sell.||Carry higher premiums than bars (may recoup some of the premium when you sell).|
Regardless of the size of your holdings, all investors should own some one-ounce silver bullion coins…
➢ One-ounce coins give you the ability to meet small financial needs when they arise, and avoid having to sell a large, multi-ounce bar.
The same is true for one-ounce bars, though coins are generally easier to sell.
I recommend that you hold both bars and coins. By doing so, you will capture the premium savings on bars, and you build a ready stash of coins for small needs.
|An Important Alert About Coins|
Don’t get talked into buying a “collectible” or “limited edition” product. You want bullion coins—Eagles, Maple Leafs, Philharmonics, etc.—not a collectible item a dealer promises is a better deal or will supposedly appreciate more.
Reports of investors being ripped off by coin promoters are common. The story is always the same: being conned into overpaying for a collectible product that never delivered the promised return.
Find more advice on choosing between different forms of silver in our article How to Buy Silver: The Ultimate Guide on Investing in Silver.
Here’s your go-to guide with the pros and cons of each option…
Buying from a neighborhood bullion dealer has distinct advantages and drawbacks…
Pros and cons of buying from a local dealer
|Take immediate possession||Premiums are likely higher when you buy, and smaller when you sell|
|No shipping or insurance fees||Insufficient liquidity to make large buybacks|
|Face-to-face transaction with dealer||Limited product choices possible|
I recommend checking your options with a local dealer. A relationship with a dealer can be helpful should you need to make a quick sale. Ask for a discount when buying multiple items.
Google “coin dealer” and your city or county. Adding the word “silver” may not help, as many dealers want to keep a low profile and “silver” doesn’t appear in their name.
Another search tool is this handy US Mint dealer locator.
For Europe or Asia, you can buy silver bars and coins at certain banks.
Look for a dealer that is more educational than promotional. Avoid anyone that promotes rare coins or any product you’re not shopping for. The best advice here is the gut test: do you feel comfortable with this person?
Consider the size of the shop. Small dealers may have limited product selection or be unable to fill a large order. Insufficient cash on hand could also prevent them from buying back a large amount of silver bullion.
Buying from an online seller comes with an obvious risk: you must pay first, and then trust the dealer to deliver. However, a reputable dealer can be cheaper than your local storefront even when shipping and insurance fees are included.
When selecting an online bullion dealer, you want to see product prices displayed on the site, along with shipping and insurance fees (you may have to search for these charges).
A dealer that doesn’t show prices isn’t necessarily bad, but you should give greater weight to transparent dealers. A delivery timeframe should also be quoted before you place an order.
Pros and cons of buying from an online dealer
|Ease of online ordering||Must trust dealer to deliver your product|
|All-in costs likely lower||Cashier’s check required to avoid credit card fees|
|Expanded hours to buy product||Product only ships after payment clears|
Compare product prices from a few dealers. Getting a low premium is important, but price isn’t the only consideration. The following factors should also weigh in your decision:
How quick are delivery times?
What are my total costs, including commission, shipping, insurance, and credit card or bank wire charges?
Is the dealer educational—or pushy?
Will the dealer send me a lot of promotions and ads?
What is the return policy if I receive the wrong product? (You normally can’t return a correctly filled order simply due to buyer’s remorse).
We generally would avoid them. They pay advertising and celebrity endorsement fees, which must be recouped by selling lots of product at high premiums.
I called one and got the old “did you know this rare coin will make you more money than bullion” sales pitch. Another one offered me a layaway plan—and would charge me interest until I paid in full. No thanks.
I have friends that swear by eBay. Beyond its convenience, I’m told that shipping is often free and you don’t pay state sales tax (there’s no federal tax on buying silver, but some states charge sales tax). You can find silver bars and coins that cost less on eBay than at a bullion shop, though many dealers also post products on eBay.
One useful feature is the Advanced Search tool. Enter the name of the product you want (e.g., one-ounce silver Eagle) and check the “sold listings” box. This search will show you what they have sold for in the past. This gives you an idea of whether the current asking price you find is competitive.
Many eBay buyers are investors who know exactly what they want—with sufficient experience to recognize a good deal. I don’t recommend eBay for new or inexperienced buyers.
As with anything you buy on eBay, deal only with sellers who have a 100% approval rating, or close to it. (Note that most silver on eBay is not auctioned, but is either “Buy It Now” or “Make Offer.”)
Check the buyer feedback on a seller you’re considering doing business with. There can be unscrupulous sellers, but they don’t last long on eBay. And eBay has a buyer protection plan that guarantees your purchase. Nevertheless, always proceed with caution, especially if you’re an eBay newbie.
Pros and cons of buying on eBay
|Usually no sales tax||Must wait for delivery|
|Free shipping is likely||Best for experienced buyers|
|May find better price than local bullion shop||Must trust seller to deliver what you paid for|
Most coin shows focus on collectible coins. Selection for bullion coins is usually limited. Buying at a coin show is not for the novice.
Pros and cons of buying at coin shows
|Can bargain on price||Usually a poor selection of bullion|
|May find other items you like||Must travel to show|
A pool account is where your investment dollars are “pooled” with other investors to buy bullion. Ownership is typically in a large bar, so together with other investors you own a “fraction” of that bar.
These programs tend to be convenient and cheap. Storage is also inexpensive, and in some programs it’s free.
The drawbacks are that in most cases the silver is not allocated in your name, which introduces counterparty risk. Delivery is also usually expensive and in some cases unavailable.
Some of the more popular pool accounts are Kitco, Perth Mint, and Everbank.
Select a company that is financially strong. Confirm the bullion is not held on its balance sheet. A bankruptcy would, at a minimum, tie up your bullion during a lengthy legal process. In a worst-case scenario, bullion could be used to meet the claims of creditors.
Also, confirm that the company holds allocated metal in its pool accounts. They should possess the exact amount of bullion that customers have bought. Holding a paper substitute for physical gold is unacceptable, as the company might be unable to meet customer liquidation demands.
An exchange-traded fund (ETF) is an investment fund that trades much like a stock. For a bullion-backed ETF, the fund’s share price tracks the price of silver.
Bullion-backed ETFs offer convenience and low cost. And the funds hold physical silver that back each share of the fund.
The biggest drawback to a bullion ETF is that the investor doesn’t own the metal. Delivery is not permitted without approval and is reserved for only deep-pocketed investors. Find more pros and cons of investing in silver ETFs compared to physical silver in our article How to Buy Silver: The Ultimate Guide on Investing in Silver.
Look for funds with high liquidity—at least 100,000 shares traded daily. You want the assurance that your shares can be quickly bought and sold.
Also, look for a list of the specific silver bars the fund owns posted on their website. Each bar carries a unique identifying number. If there isn’t a bar list, that’s a red flag.
The largest and most liquid silver ETF is SLV, the iShares Silver Trust. The fund holds one ounce of physical silver for each share. You can buy SLV as easily as any other stock. Its share price will track the price of silver (minus fees and expenses).
Other silver ETF options…
➢ SIVR, similar to SLV, but with lower volume.
➢ Closed-end funds, like PSLV. This means the number of shares is capped and the price of the fund will fluctuate not with the silver price but more with sentiment.
➢ Leveraged funds, with double and triple leverage, both short and long.
➢ Silver stock fund, SIL (Global X Silver Miners ETF). It follows a select number of silver producers.
You’re about to own one of mankind’s most enduring assets that has withstood history’s worst troubles.
Silver is a physical asset that acts as inexpensive insurance against all types of crises. Buying now is a low-risk/high-reward investment.
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