The best way to invest in silver is to gain exposure to the price of this precious metal through mutual funds, exchange-traded funds (ETFs) or exchange-traded notes (ETNs). But before investing in silver funds, investors should learn the benefits and strategies of buying precious metals.
Silver as an investment has similar purposes as gold. There are industrial uses for silver, such as jewelry, but the price is driven primarily by supply and demand and investor speculation. Typically, precious metals, such as gold and silver, are in higher demand when there is widespread uncertainty about currencies, especially with that of the U.S. dollar.
Silver is often used as a hedge against currency fluctuation or as a store for cash during times of economic uncertainty and unrest.
The silver market is much smaller than the gold market, which makes for higher volatility (fluctuations) in price. Therefore investing in silver can be risky for most investors, which is why investing relatively small portions, such as 5% or less of an investor’s total portfolio, may be appropriate for diversification purposes. Some investors prefer to buy precious metals, such as gold, silver, platinum, and copper, in the physical form of bullion coins.1 Others prefer to buy shares of mining company stocks or mutual funds, ETFs, and ETNs.