We hear a lot about investing in gold. It holds a traditional place in the world of finance and makes sense when building a diverse portfolio. But while many are looking the other way toward that yellow glimmer, others realize that the gold vs. silver debate comes down to timing. There is a time to buy silver. Is 2021 the year you invest in this versatile and industrially useful precious metal?
Why Silver May Be A Good Investment
Of course, there’s no way to throw out a blanket statement about when silver or gold is a good investment. It all depends on your current financial situation. But silver certainly has an appeal to many investors for some very good reasons.
It’s Tangible
Like gold, silver is a tangible asset, which means people can physically possess it, giving it more than hypothetical value.
This means that as the more speculative investment options like stocks and bonds tank, silver, with its inherent worth, rises.
You can hold a 10 oz silver bar in your hands (if you choose) and keep it safe from Reddit-driven investing shenanigans. That’s not only comforting. It’s smart.
It’s Less Expensive Compared to Gold
Silver is cheaper than gold most of the time. It’s easier for someone who doesn’t have millions to invest to buy some silver bullion and get the benefits of purchasing a precious metal. You could buy a lot more silver for the same price as gold.
It’s Volatile, Which Can Be a Good Thing
Silver is also notoriously volatile. This can be a good thing and a bad thing. Volatility means price swings that short-term investors can use to maximize their return on investment by buying low and selling high.
When Do Investors Choose Silver
With that said, investors tend to diversify their portfolios with silver when:
- They expect stock market returns to fall flat, and their stock-based portfolios to shrink
- We appear to be moving into a recession
- There’s reasonable talk of runaway inflation
- When the cost of necessities are on the rise
In these situations, silver can balance out a portfolio so it continues to grow or remain stable through rough waters.
What We’re Seeing in 2021
With the unanticipated economic shrinking and the need for excessive government spending in 2020, analysts anticipate rising inflation. Global leaders and Corporate America are showing signs of worry.
On top of the usual inflation drivers, we have increased demand for higher wages. Corporations who are struggling to find workers are raising wages. The cost of raw materials are rising at the same time. We can expect those costs to pass to consumers. In many cases, they already are.
The Risks and Downsides of Silver
In all fairness, like any investment, silver has some downsides.
Industrial Use Impacts Value
Unlike its softer cousin gold, silver is used in industrial applications because of its high electrical and thermal conductivity. If those industries declined or silver were to no longer find use there, the value of silver would go down for practical reasons. Some industries that depend on silver include:
- Electronics
- Solar Energy
- Electric vehicles
- General automotive
- Jewelry
- Silverware
- Corrosion-resistant metal joints and other metal alloy uses
- Photography (The physical kind. Not the ones on your smartphone)
In many ways, buying silver is in part an investment in these industries. You’ll probably agree that some of these industries are on the rise, while others are in decline.
But just to call a few out, electronics, solar power, and electric cars appear to be winners.
The home-based solar industry expanded 43% in 2020 as panel and battery technology continue to improve. Similarly, the global electric car industry topped 10 million in 2020 and continues to rise.
Then you have electronics. That demand isn’t going away anytime soon.
It’s Unpredictable
Silver’s volatility can certainly be a double-edged sword. To take advantage of the volatility, you need a means to monitor silver closely as it can spike quickly and return to baseline. But it can certainly be worth your while.
It Takes Up More Space
You can also compare silver to gold for some comparative downsides.
Silver takes up more room than gold when measured by value.
It Can Take Longer to Sell
It may also take longer to sell, depending on the current market.
How to Invest in Silver
You have many options to invest in silver.
Physical Silver
You can take physical possession of the silver by buying silver bars. You own it and can store it in a safe or safety deposit box.
Silver Stocks
Some revolve around the mining and processing side of silver. Others are more about the actual silver buying and selling.
Mutual Funds and Exchange-Traded Funds (ETFs)
A portion of the fund is invested in silver to counterbalance the mutual fund for various market environments, investor risk tolerance, or investment goals.
Exchange-traded Commodities (ETCs)
These invest in silver bullion and treat it as collateral for the bond-like fund.
Investing in Silver
Is 2021 the year to invest in silver? We encourage you to do your research and decide that for yourself.
