Can’t Afford to Invest in Gold? Consider Investing in Silver

There has been a great deal of interest in gold lately, but at more than $1,600 an ounce, it’s pretty pricey. As a result, some are investing in silver. 

Recently, I received an email from a reader, asking me this question:

I am interested in investing in gold, but I can’t afford it. Are there other options for me in terms of investing in metals?

If you aren’t too hung up on gold, you do have other options. One of the most common alternatives to investing in gold is investing in silver.

Investing in Silver

Why Invest in Silver?

Personally, I don’t get too into investing in physical precious metals. But I do know that there is interest in it from a number of consumers who like the idea of owning something tangible. Here are some of the reasons that silver might make a good alternative to investing in gold:

  • Silver is cheaper: That’s one of the biggest reasons to consider investing in silver. Rather than costing close to $1,700 an ounce, silver is at right around $40 an ounce. That’s a lot more affordable for most investors.
  • Silver is recognized as money: Throughout history, silver has been used as currency. Even though it hasn’t been considered as precious as gold, it has still been seen as money. If you believe a financial apocalypse is coming, silver can stand you in good stead.
  • Silver often follows gold: The price of silver often tracks the price of gold. So if gold goes up, there is a good chance that silver will as well. While there is occasionally some divergence between the two, historically silver tracks gold’s movements relatively closely.

Having an option to invest in silver can provide you with many of the benefits of investing in gold, but without many of the expenses. It’s relatively easy to buy silver coins (and gold coins) – you can even do it on eBay.

What You Should Know About Investing in Silver

It’s important to note that investing in physical precious metals is a little different than investing in stocks and bonds.

First of all, you have to find a way to store your investment. If you are investing in something tangible, you have to keep somewhere. You can pay for someone else to store it for you, but that will eat into potential returns. Another option is to store it yourself. You do have to be careful, though, since you could be vulnerable to theft. If you are going to store precious metals on your property, you should invest in a very good safe.

Next, you need to consider the tax ramifications. When you invest in a physical precious metal, like gold or silver, it is considered a collectible for the purposes of the IRS. This means that you don’t get the special rate for long-term capital gains – no matter how long you have had the metal. When you sell your silver, you will need to pay a 28% tax on the capital gains. The exception is if you have jewelry. If your physical silver investment is in jewelry, you won’t owe tax on it at all when you sell.

Finally, you have to consider how useful your silver investment will be if things really do go to hell in a hand basket. If a financial apocalypse really does arrive, who is going to be able to afford your silver? And who is going to want it? In reality, emergency preparedness and survival skills will likely be more valuable, and good food storage will be worth more than silver.

Bottom Line

Money TreeInvesting in silver can be a solid idea for someone interested in diversifying with precious metals. However, it’s important to consider your reasons for wanting to invest in physical metals. Be realistic about what you can expect, and be careful about what portion of your portfolio is tied up in silver.

Written by Miranda Marquit

Miranda Marquit is a freelance writer and professional blogger, specializing in personal finance, small business, and investing topics. She writes for a number of financial web sites and blogs, and has been featured in numerous media. Read about life as a freelancer at MirandaMarquit.com and in her book Confessions of a Professional Blogger.

One Response to Can’t Afford to Invest in Gold? Consider Investing in Silver

  1. Remember that silver is not so much an investment as it is a hedge against inflation. As dollars become less valuable, the price of silver will naturally go up. Said another way, as the number of dollars in circulation increases, the value of each individual dollar goes down, causing the price of silver to rise. This is why the price of silver will spike almost immediately if the Federal Reserve implements another round of “Quantitative Easing.” The term quantitative easing is just a fancy way of saying they’re going to put more money into circulation. This is inflation.

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