Although it might sound cliché, diversification is truly one of the most important aspects to successful investing. It’s virtually impossible to create a steady stream of investment income with only one asset class like stocks, for example. If you want to be a successful investor, you need to be willing to branch out into all areas of the market.
With that said, commodities are one of the more interesting assets classes to trade when looking to diversify. Specifically, in terms of precious metals, gold is by far the most well-known and common metal to buy and sell in the commodities realm, yet it wouldn’t make sense for an investor to exclusively invest in gold, because it would negate the original reason of entering the commodities market – diversification.
Thankfully, there is another option for those looking to diversify and gain exposure from an entirely new and different asset while still sticking in the realm of precious metals.
Commonly referred to as the most versatile metal in the world, silver offers an array of investment potential for those who are informed of its varying purposes and qualities.
Why silver should be your next investment
Beyond the immense benefit of offering a way to diversify in precious metal investments, silver actually brings a lot more to the table than its peers, i.e. gold, copper, and palladium.
As it turns out, pure silver is the best known conductor of electricity and heat out of any elemental metal on earth. Because of this, silver is a fundamental part of electrical circuit breakers, switches, batteries, and an unbelievably long list of more electronic devices. And this is just grazing the surface of the electrical functions of silver; the list grows even longer when the automotive, mechanical, and medical uses are taken into account.
Roughly 50% of the demand for all the silver in the world comes from industries such as these. Long-term investments in addition to jewelry and a few niche applications account for the remaining demand.
From a fundamental standpoint, this means that there are an overwhelming amount of other factors, beyond speculative investing, that drive the demand for silver. Without question, this is absolutely invaluable to silver investors, because as long as the demand for an item exists (even if it doesn’t rise) and the supply gradually diminishes, the price will theoretically increase over time.
Most likely, this is why investors buy silver, as they seek the inherent benefits of its limited supply and seemingly never-ending and demand. This reason alone aught to be enough to convince anyone to own some silver, but the argument to buy silver actually gets more convincing beyond the supply/demand and diversification aspects.
Hedge funds and institutions that manage billions of dollars regularly include silver in their portfolios purely to protect against inflation. Although the Federal Reserve purports to have complete control over inflation by manipulating interest rates, in the real world, inflation could theoretically get out of the Fed’s control with such velocity that there would be nothing they could conceivably do to reverse the process; this is a seriously real and inconceivably dreadful possibility.
Even if nothing economical or political goes awry that would trigger exponential inflation, inflation will continue to steadily creep along at its forecasted pace, and safe haven assets like gold and especially silver can essentially be used as another form of currency, thereby sheltering prudent investors from inflation.
The big investment in silver
One of the most famous institutional investments in silver occurred when Warren Buffet, who’s considered one of the greatest investors of all time, purchased 130 million ounces of silver without providing much of an explanation.
Perhaps no explanation was necessary, because silver as an investment truly speaks for itself. What might need an explanation, however, are the ways one can go about purchasing silver. Coins, bullion, and electronic futures trading are the main ways to gain exposure to the silver market, but the latter is undeniably less satisfying than the tangible forms of silver – coins and bricks.
The nuances and pros/cons of each form of silver investing certainly warrant their own in-depth explanations. But for now, those who are merely aware of silver’s unique and convincing investment qualities will automatically have a leg-up on the rest of the market that remains uninformed and likely misses out. With this knowledge, it becomes overwhelming clear that owning verified and pure silver is not only a shrewd investment, but it is also essential to maintain a balanced financial portfolio.
Make sure to read up on the basics of stock and the stock market before any real investment.