make an investment in silver

Many financial advisers will recommend investing in a basket of uncorrelated assets with somewhere between 5 and 10 per cent invest in precious metals. This could be in the form of mining shares, managed funds, ETF’s or by purchasing physical silver or gold and storing it yourself or in a third parties vault. Coins and bars can be bought via Ebay or through a reputable silver broker online however you will have to pay a premium to include the cost of manufacture. In addition you will have consider storage and possibly insurance. Clearly buying and holding physical metal is not ideal however there are alternatives that you may wish to consider.

Three alternative ways to gain an exposure to the commodities market
1. Exchange Traded Funds or ETF’s are an effective way to simply gain an exposure to the price of gold and silver. ETF’s are bought through your broker much in the same way, and for about the same cost, as stocks and shares. The price of a silver ETF will directly follow the price of silver itself meaning you have a direct exposure to the market. They are also traded on an exchange meaning you can sell them quickly and at the market price should you wish to liquidate them. Often the only cost associated with them will be an annual management fee which normally runs at roughly 0.5%. This makes ETF’s a cost effective and easy way to gain an exposure to the silver price.

2. An alternative would be to purchase shares in a silver mining company. However any purchase of shares should be only completed after through due diligence of the investment. This method exposes you to both risk of a fluctuating silver price and the common operational issues of running a mining or exploration firm. An assessment of management, cash flow, operational track record, geographical risks and political stability for the mining companies operations should be considered.

3. Spread betting firms also offer a way to gain an exposure to the commodities prices. You can effectively bet that the silver price will go up or down. These investments tend to be leveraged too meaning you only have to stump up a 10% deposit to get 100% exposure. While this sounds tempting as you could increase your gains, you could also potentially leverage a greater loss too. There will also be a bid/ask spread to consider when using a spread betting firm which could be around 2%. On the plus side for spread betting, all ‘winnings’ are tax-free so you keep all of the profits you make and its also a liquid form of investment with trading executed online instantly.