Silver Stocks Vs Silver Bullion: What Should You Invest In?

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Akin to gold, silver has been used as a fiat currency for millennia. It is a key investment commodity that can be traded on coins, bars, futures contracts, exchange-traded products (ETP), amongst others. That said, silver investors often debate over the best way to include the precious metal in a portfolio – the widespread form of bullion, or silver mining stocks that normally track the market value of the metal. In this article, industry experts provide valuable insight into what you should invest in: silver stocks versus silver bullion.

Silver Bullion Is A More Appropriate Investment

“All else being equal, mining stocks are a higher leverage investment than simply gaining exposure to the metal those firms mine. Miners tend to outperform the metals during rallies, but they also tend to suffer more acutely when metal prices are falling. This is partly because many (sometimes complex) factors influence the financial health of a company, whereas an individual commodity's price dynamics are more straightforward.

However, the silver mining sector is a bit strange: Only about 30% of newly-mined silver each year comes from primary silver mines. The vast majority of silver is mined as a byproduct of zinc and copper operations. Thus, the performance of silver stocks is heavily influenced by these base metals, which complicates their outlook as an investment. For these reasons, silver bullion is a more appropriate investment if the goal is to diversify one's portfolio with a non-correlated asset. The potentially greater upside of silver stocks naturally comes with greater risks.”

Everett Millman, Precious Metals Specialist, Editor, Gainesville Coins

Two Very Different Investments

“Mining stocks and bullion are two very different investments. Silver mining stocks allow investors to participate in the growth of the company and utilize leverage in hopes to achieve superior returns compared to the metal they are mining. It is based more on speculation and a future promise to deliver than physician bullion. If you are looking for wealth preservation, bullion offers more benefits and is superior compared to the mining stocks. It is, however, not as liquid as an investment than mining stocks and has issues with storing the bullion if purchased in bulk.”

Ryan Inman, Financial Planner for Doctors

Silver Bullion

“The Liberty Dollar Network LLC is not exactly an investment, but it may be of interest to your readers. We offer Silver Certificates designed to work in parity with US Dollars in barter commerce, backed by .999 Fine Silver. We offer the certificates on a silver base of $25 per ounce. The silver bullion is investment grade silver from Sunshine Minting Co., the leader in silver bullion worldwide. The certificates can be branded for local communities, for specific businesses, etc.”

Wayne Hicks, Marketing Director, Liberty Dollar Network LLC

Investor Needs And Ideal Risk Level

“I think it really depends upon the investor’s needs and ideal risk level. Silver bullion will tend to be safer and steadier, as there are fewer unknown quantities in this market. We know how much silver is out there and what demand there is for it. Silver stocks will usually vary more, as they depend upon the individual fortunes of each company. If they have had a good or bad year then their stock price can rise or fall greatly.”

Phillip Konchar, Head Tutor, My Trading Skills 

If You Are Really Bullish On Silver, Buy The Stock

“More silver has been mined from the year 2000 until now than was mined in the entire twentieth century. If you are really bullish on silver, buy the stock. We did this with platinum and purchased Impala Platinum in South Africa. Though this was a risky investment, we doubled our value for some clients.

Silver doesn't necessarily have to increase for the stocks to profit.  Sometimes, these mining stocks get so beaten down that you can buy when they are down and out.  Then, sell when they recover.  Having stated this, they are risky.  Guessing the direction of commodities is very difficult.”

Holmes Osborne, CFA, Osborne Global Investors, Inc.

Silver Stocks Are A Much Better Investment

“I believe silver stocks are a much better investment than silver bullion. The leverage you get with silver stock is simply amazing. If silver prices increase by say 5%, if you hold bullion, then your gain is 5%. If you own silver stocks, your gains could be much higher, we are talking multiple of gains in the silver price. Also, remember; with owning bullion, you pay a premium to own the metal and then you have to worry about the storage costs. With silver stocks, you only have one cost; trading commissions.

Regardless, I believe silver is worth paying close attention. The gray precious metal could be setting up for massive rewards. The fundamentals of the silver market continue to improve as the price remains suppressed. When fundamentals matter (in the long-term they do), the silver price could be much higher than it currently is.”

Moe Zulfiqar, Senior Analyst, Lombardi Letter 

Ultimately, the best choice of silver investment is dependent upon the individual. Similar to other major commodities, the price of silver is affected by several factors that include supply, demand, market sentiment, speculation, and geopolitics.

Esteemed precious metals investment advisor and author, Mike Maloney said it best when asked which was the better investment: “In a currency crisis, all stocks will be headed south, while gold and silver will be heading north, so it doesn’t matter if they’re mining stocks so I would go balanced. I wouldn’t go all stock – I would have some stocks… So you should have a core position of some metals, and then the stocks are your speculative play, the thing that you want for leverage.”

Yet, unlike gold, silver is utilized in several industrial and medical applications. It has long been used within the auto industry, in solar panels, and even for different nanotechnologies in the medical sector, just to cite a few examples. Therefore, including silver in a portfolio is a good diversification strategy, but always remember to do your due diligence.