Sunday, May 1, 2011
Five Tips on Buying Silver
With the price of silver steadily increasing it is a good idea to understand the best way to buy silver to reduce ones costs while ensuring a safe and risk free transaction. Such things as what type of silver do you want and for what purpose. Do you want the silver held in trust for you or are you going to take delivery and store it your self? Do you want to buy silver bullion or just 'bet' on the silver price? How much do you want to pay for your silver? The larger the quantity you buy of course the smaller the premium per ounce. This needs to be balanced with your budget and how much you can afford to spend and how often.
1. Finding the right dealer. There is a multitude of dealers available so finding the right dealer for you the first step. Ninety percent of any activity should be in the research. The actual activity of buying silver will then be a simple matter of getting the right silver at the right price with relatively little risk.
2. Doing due diligence. It is important to do some due diligence. Not just pick the first dealer that comes along. There can be a big difference between the dealers in terms of:
Checking each dealer for these factors will go a long way to ensuring you have a satisfactory exchange of funds to silver.
3. Types of silver to buy. There are a number of types of silver to buy or rather ways to buy into silver. Of course one is looking for the best return and so all costs need to be included in any transaction costs. This would include such items as the premium the dealer charges to sell you the silver. Generally this will be the charge above the spot price for the day. Then, if you are taking delivery, there is the shipping and insurance costs.
For large bullion bars this can be significant. There are also such charges as management fees and administrative costs if you are buying into a vehicle that only operates on the price of silver rather than buying silver bullion. Silver Exchange Traded Funds (Silver EFTs) are a good example of this. Silver stocks or shares in companies that produce silver are also subject to other costs, not the least of which is potential taxes. In addition, with buying stocks in companies that produce silver, this is not a stand alone product but a by product of other mining activities and so the stock value or share price is going to be subject to the vagaries of the other mining products.
On the other hand one should keep in mind that, with the continue rise in the price of silver, it is becoming more feasible to mine silver as a stand along product and that could make owning some stock or shares in silver mining companies more attractive. Buying silver coins and rounds, although tend to carry a higher premium, have an attractiveness due to their smaller weight, easier to carry around and ease of use in trade or exchange when times are hard.
4. Other types of silver. Other types of silver to buy include junk coins. These are old coins that have a percentage of silver in them. Truthfully, junk silver coins is not the correct name for them. They are early silver coins valued purely for the silver content. They are still legal tender in the country they are, or were, used, such as the US, Canada and Australia for example but the value of the silver in them will be higher than the face value. You can buy them by the bag or by the roll and they consist of early dimes, quarters and half dollars. Scrap silver is another type of silver one can buy. Here one can buy silver at spot or often less. Old and broken jewellery and even old bent coins.
5. A Smarter Way to Buy Silver. Probably a smarter way to buy silver that relieves one of the pains of shipping and insurance as well as the potential for taxes and high management and administrative costs is using a custodian with which you open an account and they store the silver for you. Again due diligence is required as there are several of these around and not all may suit you. With this system you open an account and fund it and then the silver is purchased form you and stored in a bank vault along with other clients silver. The silver is stored and there is usually a small administrative charge but essentially that is it. The custodian takes the responsibility for insurance and audits (Always ensure an audit is done on a regular basis) and as there is no interest earned but one is counting on the value of the silver increasing there is generally no tax involved (one should always check with ones financial advisor before embarking on any purchase of precious metals)
One such system is Gold Money. A big advantage here is that one is not bound to buy a minimum or maximum of silver but can buy any quantity. This is good for those that cannot afford to buy large quantities but can make regular savings of small amounts. This silver is stores in banks in London, Zurich and Hong Kong and fully insured and audited by an independent reputable third party to ensure that the record of silver in the accounts matches the actual silver in the vaults. One can also 'cash in' one's silver at any time as needed as there are no time constraints.
When it comes to tips on buying silver, Gold Money is an ideal way to buy silver and build up you silver nest egg and this must surely take the biscuit.