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Last Updated on: 19th October 2021, 08:28 pm
Silver is one of the world's most sought-after precious metals by collectors and industrialists alike. However, if you're not careful, you might fall victim to fraudulent vendors and scam artists who prey on unsuspecting buyers. Unfortunately, underweight, plated, or outright fake coins aren't uncommon in the precious metals industry.
The good news is that there are steps you can take to protect yourself. In this article, we've shared our top tips for buying silver. This way, you can invest with confidence knowing that you're getting the best deal possible.
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Silver Investments: Why Invest in Silver Coins?
Since antiquity, silver and gold have served as reliable stores of value and media of exchange. Given its wide industrial applications and scarcity, silver naturally holds value as a manufacturing resource whose price cannot be artificially manipulated by decree. For example, some of silver's unique chemical properties include:
- Contains light-sensitive halide salts, such as silver nitrate, used in photography
- Highly resistant to atmospheric oxidation
- Highest-known thermal and electrical conductivity among all metals
- Catalytic properties convert ethylene to ethylene oxide
- Among the least-reactive transition elements in the world
Together, these special properties of silver make it virtually irreplaceable in the manufacturing of electronics, motor vehicles, and circuit boards. Plus, its brilliant white shine makes it aesthetically pleasing to the eye and is therefore used widely in jewelry and cutlery-making.
In short, silver has myriad applications both cosmetic and industrial. There's little chance that silver will ever go out of style or out of demand. Therefore, any investment in silver coins is likely a safe one, since silver metals have inherent value that has lasted through the millennia.
Top Tips for Buying Silver Coins as a First-Time Buyer
Ready to invest in silver coins for the first time, but don't want to fall victim to a scam? Below, we've listed some of our tips for buying silver coins so you can save money and get a fair deal.
1. Buy in 1-Ounce Denominations
To avoid potential fraudsters, stick to single-ounce coins. Although there are cases of one-ounce fakes found online, the odds of getting duped by a scammer are far lower when you buy in lower denominations. This is because, for many scammers, their margins are too low to make the risk of fraud worthwhile on one-ounce sales.
If you're buying one-ounce silver coins, we recommend opting for government-minted coinage such as Canadian Maple Leafs, Australian Kangaroos, and American Eagles. These coins have distinctive features and markings that trained eyes can easily spot.
2. Buy in Bulk
Just like how it's cheaper to buy groceries in bulk, the same goes for silver coins. Coin dealers often bundle large quantities of coins at a discount. For example, a one-ounce American Eagle silver coin might cost $31 apiece but $29 if purchased in bulk, leading to cost savings that continue to amplify as your purchase quantity increases.
3. Diversify With Bullion
Silver coins are an excellent investment, but they aren't the only game in town when it comes to silver investing. The other option is to invest in silver bullion. Unlike minted coins, which are backed by the full faith and confidence of the issuing government, bullion consists of pure metal that is valued solely on its content.
Bullion, like coins, has historically maintained their value well. However, these items do not have collector's value and thus do not need to be as meticulously maintained. Some investors find that bullion bars are the “low maintenance” investment option compared to coins. If you want deeper exposure to the silver market, you can't go wrong with splitting your position between coins and bullion.
4. Use a Custodian Service
Those interested in getting started with silver investing should consider using a professional precious metals custodian to hold their assets on their behalf. There are a few reasons why someone might want to opt for a precious metals custodian, which we'll list below.
First, they ensure that your assets are properly vaulted and insured from theft or damage. Second, they help retain your silver coin's mint condition, which drastically improves its resale value. Lastly, custodians are necessary in case you want to invest in silver through an IRA or any tax-advantaged retirement account—silver held at home is ineligible for IRA inclusion.
Since it isn't exactly straightforward which types of silver can be added to IRA or 401(k)s, you might find it useful to check out our guide to all IRA-approved silver metals.
5. Buy Through a Self-Directed IRA
If you buy silver coins outside of a tax-advantaged retirement account, you're on the hook for capital gains taxes if they are held for longer than one year. For many readers, that amounts to a 20% loss on your investment due to avoidable tax liabilities.
Fortunately, we can avoid capital gains taxes legally by investing in silver coins in a self-directed IRA. Any coins or bullion held within an IRA is not subject to capital gains taxes, saving you potentially thousands of dollars when you decide to cash out. Note, however, that IRA contributions are currently limited to $6,000 per annum ($7,000 if you're aged 50 or older).
How to Spot a Fake Silver Coin
Counterfeits are an unfortunate reality in the precious metals world. Whether you're investing in gold, silver, or platinum-group metals, it’s crucial that you stay vigilant against fake coins sold from shoddy or fraudulent sellers. To protect yourself from fake silver coins, here are some of the best methods of verifying the authenticity of your silver coinage:
- Hold a strong magnet (e.g., neodymium N52) to it; silver is non-magnetic
- Use a magnetic slide device; silver is slow-moving down magnetic slides
- Ice cubes should melt immediately when placed on silver; silver is the world's best heat conductor
- Authentic silver coins have hallmarks on them denoting their silver and copper percentages (i.e., .999)
- Use a digital electronics scale to weigh your coins; authentic coins weighing one troy ounce will weigh precisely 31.1 grams.
For a more thorough guide on spotting counterfeit silver coins, check out our article on finding the value of your silver jewelry—in it, we provide a more detailed breakdown of these, and other, techniques for authenticating silver.
Generally, one-ounce coins don't pose too much of a risk for fakes. It's only when you get into heavier, multi-ounce collector's coins and numismatics that you start running into counterfeits. ‘
If you stick to well-known, reputable dealers, you can rest assured that you're getting a genuine item. In most cases, the best place to buy silver is through a third-party trustee that provides full FDIC insurance coverage for all deposits. Silver purchased through a precious metals IRA company involves insured trustees so that every transaction can be made with peace of mind.
Preserve Your Wealth, Buy Silver Today
For many, silver is not merely an investment but a form of strategic wealth preservation. Whereas traditional investments generate income or value, silver and other precious metals do not. Rather, they hold value—and they hold value exceptionally well, might I add.
In fact, the spot price of gold has consistently trended upward over the last 100 years in which we've had reliable market data. Recently, silver's seen even more impressive growth due to the rapid development of silver-intensive renewable energy. In inflation-adjusted terms, the price of silver has skyrocketed nearly 400% since August 2002.
To preserve wealth during the next economic crash, and to build more retirement savings, savvy investors would do well to diversify with silver coins and bullion. To get started investing in silver in a tax-sheltered account, check out our reviews of the top precious metals IRA companies on the market today.