Investing in silver is one of the best ways to save up for retirement. Today’s article gives seven reasons why it might be a good addition to your retirement investment portfolio.
In this article:
- Silver Has Limited Supply
- There Is a Huge Global Demand for Silver
- Silver Can Function as Legal Tender or Money
- Silver Is an Excellent Storage of Economic Value
- The Prices of Precious Metals Tend to Increase During Economic Crises
- Compared to Gold, Silver’s Cheaper
- Silver Investing Includes Various Other Options
7 Benefits of Investing in Silver
1. Silver Has Limited Supply
In an interview with precious metals news website Kitco News, Keith Neumayer, the CEO of silver mining company First Majestic Silver, describes silver as “extremely rare.”
Just like gold, oil, and other minerals mined from the Earth, nobody can manufacture silver.
2. There Is a Huge Global Demand for Silver
The global demand for silver is huge because of its industrial applications. It’s an important component in manufacturing electrical and electronic products.
In 2018, for example, manufacturers around the world used more than 587 million ounces of this precious metal for their products.
Silver’s huge demand in the industrial sector is due to its very high thermal conductivity. This makes silver the ideal component for products that require temperature manipulation.
Not only that, but silver also has the highest level of electrical conductivity for all metals. This makes it the ideal material for electricity conducting products like wires, which have a huge demand globally.
Silver is also one of the most popular materials jewelers use to make jewelry. In 2018, for example, jewelers all over the world used more than 200 million ounces of silver to make jewelry.
Central banks also use silver to mint legal tender (in the form of coins). That’s why most – if not all – central banks around the world store a lot of silver in its reserves, together with gold, which adds to the global demand for it.
3. Silver Can Function as Legal Tender or Money
Speaking of using silver to mint legal tender, more and more places are now accepting it as legal tender. This means more than just being an investment vehicle, investors can now use silver for daily transactions.
In the United States, some states like Louisiana, Utah, and Texas have already accepted silver as legal tender. Other states are also considering following suit, while others want to revise policies on the purchase of silver.
One reason for this is because silver strikes a happy balance between actual fiat currencies and other precious metals.
Compared to fiat currency, it’s harder to acquire silver, but compared to other precious metals like gold, it’s easier to acquire.
Fiat Currency Definition: This refers to a currency whose value is dependent on its supply and demand rather than by a physical commodity, like gold and silver. Today’s major currencies like the U.S. Dollar and the Euro are examples of fiat currencies.
4. Silver Is an Excellent Storage of Economic Value
Since time immemorial, people have considered precious metals to be reliable stores of value. They’re so reliable as an inflationary hedge that countries have gone to war because of them.
Civilizations and governments have come and gone but silver’s value remains high. Because fiat currencies depend on governments and civilizations that mint them for their value, they’re not as stable or reliable compared to silver.
5. The Prices of Precious Metals Tend to Increase During Economic Crises
Economic and investment managers have long considered precious metals like gold and silver as safe money havens. That’s why when economies go south, money flows from financial securities and fiat currencies to precious metals like silver.
Considering their limited supply and significant increases in demand for them during economic crises, isn’t it any wonder why their values go up when economies are down?
Case in point: during the 2008 sub-prime mortgage crisis and the years that followed. During that period, stock prices plummeted but the prices of precious metals and commodities went up.
During times of economic uncertainty, investors flock to safe havens, which they deem to be certain. And precious metals like silver offer such havens, hence the increase in their values during such times.
6. Compared to Gold, Silver’s Cheaper
Silver is no doubt a very precious metal with limited supply and huge demand. This gives it a very high potential for growth or at the minimum, capital preservation.
Part of why it’s popular is the fact that, as a precious metal, it’s not as expensive as gold. This makes silver investing ideal for newbie investors who don’t have a lot of investment capital and experience yet.
7. Silver Investing Includes Various Other Options
Investing in silver isn’t limited to actual silver bullions or silver bars and coins. Investors can indirectly invest in this precious metal through silver-related financial securities like:
- Investing in the stock market through stocks of silver-mining companies
- Silver-related derivatives, such as futures and options contracts
- Silver Exchange-Traded Funds (ETFs)
Investors who buy shares of stocks in silver-mining companies can earn in two ways:
- Capital appreciation — This refers to an increase in the market value of a share of stock. Investors gain by selling their stocks at a higher price than their buying cost.
- Dividends — Dividends refer to the part of a corporation’s income that’s distributed to its shareholders. Dividends are usually not guaranteed in both frequency and amount.
Futures and options are financial contracts that give investors opportunities to buy or sell something, like silver, at a fixed price in the future. Depending on the current market price of silver, investors can take advantage of the difference between the market price and the agreed-upon price to earn a good trading income.
The only difference between a futures and an options contract is the investor’s obligation.
- Silver Futures Contract — Investors who buy futures contracts are obligated to buy or sell the underlying asset at the agreed-upon prices and dates.
- Silver Options Contract — Under an options contract, investors who buy options contracts have the choice to exercise their rights to buy or sell at the agreed-upon price within an agreed-upon time frame.
Finally, an ETF is a mutual fund whose shares are traded in an organized exchange such as the NYSE. A silver ETF is basically a mutual fund whose underlying assets are physical silver, which can provide capital appreciation opportunities.
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It’s longstanding global reputation as an excellent store of value that can withstand changes in governments or societies, the diverse investment options it offers, and its ability to increase in value during economic downturns, are some of the benefits investors may potentially enjoy.
Are you considering investing in silver to grow your wealth after retirement? Why or why not? Share it with us in the comments section below.
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