Gold’s more affordable cousin, silver, is usually the go-to choice for beginner investors. However, in the recent years, the return-prospects of silver investments have been quite underwhelming. The prices of gold keep rising steadily. On the other hand, silver prices are generally bound to a specific range. But if you are planning to invest in a reliable platform, then you shouldn’t strike it off just yet since it still manages to offer most of the qualities of gold investments at a fraction of the cost.
Why Invest in Silver?
The first step to figuring out if it’s worth investing in is to evaluate why silver is such a great investment opportunity. Here are some of the benefits of investing in silver.
Cheaper Than Gold
One of the most significant selling points is that it is a precious metal that costs around 1-2% of that of gold. Such an attractive price makes it a great investment option for beginners and young investors who don’t yet have a broad portfolio or a substantial capital. Moreover, it is a liquid asset, so it is easy to buy and sell whenever you want — just like gold.
Safe Haven During Economic Downturns
When a financial crisis like a recession occurs, you may have notice that the price of precious metals like silver and gold tends to go up. This is because, during this time, investors try to move their capital out of the stock market. They will move it into more reliable assets like precious metals. Hence, silver is negatively correlated with stocks and bonds. They are expected to retain or even spike in value during such economic crises. Thus, they offer fantastic payday opportunities if you sell them during the turbulent market times.
Hedge Against Inflation
On the same lines, it is considered as a hedge against inflation when the value of currency plunges. Here, silver can act as a great shield to protect your capital from the falling currency by compensating for inflation with the rising price. Unlike legal tender, it is a finite resource, so there is never a risk of it losing its value like currency.
Immune to Typical Investment Risks
When investing in stocks, funds, and REITs, you have to, directly or indirectly, depend on other institutions to hold their end of the bargain during the tenure. Moreover, such investments are at risk of cybercrime, hacking, scams, etc. On the other hand, when you invest in silver, you don’t have to depend on any institutions. You can buy them as you want, keep them with you, and sell them whenever you want.
Lastly, it is tax-free in Singapore. The government has set investment-grade precious metals like silver and gold to be exempted from GST to encourage the bullion market. Hence, this can be an excellent long-term investment if you don’t want to pay a significant sum in taxes. Although, do note that jewelry made of silver does not count as investment grade.
Some Downsides of Silver Investments
Just like any other kind of investment, silver, too, comes with some risks and downsides. Therefore, you must be aware of these before you invest your money into silver. Here are some of the top risks that come with silver investments.
Possibility of Poor Returns
Since they are not-so-risky investments, unlike stocks and funds, they also don’t offer the same explosive returns. Additionally, they are also a protection against recession, which makes them unlikely to perform as well as other investments. Hence, there is a chance that your investment in silver will fail to offer significant returns, especially in the short-run (as discussed below).
Highly Volatile Investment
Although silver is considered to be a wise investment, you must not go on a limb to hoard, i.e., you should be careful about how much you buy and when you buy. It has the potential to swing your portfolio, sometimes in the wrong way. Hence, silver can be a component of your portfolio, but not the majority of it.
High Risk of Theft
If you invest in bullion silver, that is, silver bricks or coins, then you need to store them at a safe place. This can be a logistical nightmare if your investment is enormous as there is always some risk of theft, be it at your home, or a bank.
Then, Should You Invest?
Depends. If you want to invest for a short term only to secure your capital, then it is a great choice. On the contrary, it is a terrible investment if you expect a stocks-like explosive return in the same short time. Yet, if you are talking about long-term investments, then silver can be a great investment option as long as they make up only a component of your investment portfolio.
If you look at the price of silver during the last ten years, then the rate has always hovered around S$20+ per ounce in Singapore. This has been the range of silver prices of the last decade. With only a few dollar variations here and there per year. But if you look at the costs in the last thirty years, then you will see that the price has doubled, from S$10+ in 1990 to S$20+ in 2019. Then, there was the significant spike in 2011 where the per ounce price peak at S$60 for some time.
Hence, you can see how in the short term it does not offer much benefits and returns except that it is a hedge against inflation. But in the long run, you can potentially earn high profits with minimal risks. So if you are planning to invest in the long term, then you should definitely consider it as one of the investment platforms.
There are three ways of investing in silver. One, you can buy bullion silver bars or coins, i.e., physical silver. Two, you can invest using a Silver Savings Account with UOB for a minimal service charge and transaction fee. Three, you can invest in Silver Exchange Traded Funds (ETFs) via the New York or Hong Kong stock exchanges, avoiding all the logistical issues with physical silver.
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