Humans have been investing in precious metals such as silver as an alternative to traditional investments like bonds for many years. It has become a popular way of investment over the last few years.
It’s important to understand that there are several ways you can include silver in your portfolio. They include purchasing physical forms or bullions, futures, Exchange-Traded Funds (ETFs), and mutual funds. Each way to invest in silver comes with its risks and rewards. Thus, it’s crucial to conduct extensive research to find the best way to protect your portfolio with silver investment.
Read on as the article discusses why you should consider using silver as portfolio insurance.
Table of Contents
1. Growing Demand Of Silver
The demand for silver is expected to grow exponentially in the coming years. This shiny metal is used in making jewelry while forming an important component in the manufacturing industry. These applications have contributed to the decline of the silver supply.
Besides demand and supply, other actors may influence this precious metal’s price. Some of these factors are behind the reason why silver is so cheap. Conduct extensive research to understand the price of silver to avoid getting duped by dishonest suppliers out there.
2. Inflation Hedge
As an investor, you should understand that wars, natural calamities, and politics can affect the market’s stability. These factors may also affect the purchasing power of a dollar. Thus, investing in silver may protect your portfolio against these troubling times.
Over the years, the economy has been at risk from trillions of added money. For this reason, you should be ready to experience high inflation in the coming years which might affect the value of your savings in the bank. Due to its wide applications, silver may maintain its value compared to other assets such as stocks that tend to depreciate during inflation.
Including silver as your portfolio insurance may protect you against other economic crises such as deflation, interest rates, and much more. It’d be best if you understood that silver could be used as currency during turbulent times, thus saving yourself from the economic crisis.
Another reason why you should include silver in your portfolio is due to its high liquidity. Unlike other investments such as buildings, you can easily convert your silver investment into cash. Using silver as a liquid asset won’t lose its substantial value in the conversion process.
When converting your silver investment, it’s important to conduct the transaction on a safe platform. This will save you from losing your entire investment to dishonest merchants out there. It’s also important to conduct extensive research to understand the value of silver. The value of silver is closely linked to spot price, which is the market value of unrefined metals.
4. Portfolio Diversification
Including silver in your portfolio will increase the safety of your assets. Silver may have negative or few correlations with other investments such as stocks and bonds. When other assets’ prices are going down, the silver investment may still maintain its value.
Unlike other diversification methods, silver may be a budget-friendly method to diversify your platform. The fact that silver has several applications will guarantee it maintain a steady value, saving your portfolio from market collapse. Thus, it could protect your wealth.
5. No Cyber Risks
Most people may have their assets in shares, bonds, and paper profits. These assets are not tangible and may increase your chances of cybercrime attacks. On the other hand, including a physical form of silver in your portfolio will reduce the chances of identity theft, phishing, and other related internet crimes. However, it’s important to ensure you store and insure your bullion in a reputable holding vault to save them from theft or loss.
Are There Any Risks Associated With Silver Investment?
Just like any other precious metals, there are several risks associated with the silver investment, and they include:
- Recession concern: In case of an industrial decline, the price of silver may decline. This is because the price of silver mainly depends on the market movements, such as demand and supply. If the demand is low, this will lead to decreasing value of silver due to excessive supply.
- Sensitive to technology shifts: Technological advancement can lead to the development of a metal that can replace silver, thus reducing its demand.
- No passive income: Unlike bonds, silver doesn’t offer interests. To earn, you’ll have to sell part of your entire investment when the price rises.
Investing in silver will protect your portfolio against troubling times such as inflation. It will also increase the security of your assets due to its increasing demand and high liquidity. Although, it’s important to understand the associated risks that might affect your silver investment.