Learning to Invest in Silver

Silver EagleOne method of investing in silver is with government issued bullion coins. The official silver bullion coin of the United States is the American Silver Eagle. These coins are guaranteed by the US government for silver content and sold through a network of authorized dealers. Each coin contains one ounce of silver. The price for Silver Eagles usually consists of the cost of silver plus a premium to cover the cost of manufacture, distribution, government, and dealer profit margins.

A second method for investing in silver is with silver rounds. These are privately minted one ounce silver usually in the shape of a coin, although sometime minted in the shape of a miniature bar. These silver rounds carry various designs and can sometimes be minted with custom designs. Premiums are usually lower since these are minted privately and are not legal tender. The value of silver rounds is mostly that of the silver content.

Junk silver presents another silver investment option. Before 1965, some United States circulating coins were minted in 90% silver. Bags of $1,000 face value pre-1965 coins with little collectible value can be purchased as junk silver coins. This $1,000 face value bag will have about 715 ounces of pure silver. This is an interesting method of investing in silver since you are getting old United States coins. Although unlikely, it may contain collectible coins. Each coin also remains legal tender for the face value.

Another method of investing in silver is with 100 ounce silver bars or 1,000 ounce silver bars. Since the bars are not minted into individual coins and are a bulk purchase, premiums are traditionally lower than other methods. Silver bars are produced by certain manufacturers such as Engelhard or Johnson Matthey. They can be purchased from bullion dealers or other marketplaces.

A final potential method is with a Silver Electronically Traded Fund. This type of investment is traded like a stock and can be purchased from a broker. Each share in the ETF will represent a certain amount of silver held in a trust less custodial expenses. As shares of the ETF are purchased or redeemed, the trust buys or sells physical silver. In theory, the price of the ETF should track the underlying market price of silver.