The sizzling returns of silver has investors jumping onto the speculators band-wagon. As an investment, the metal has as many ardent adherents as adamant detractors. In April 2011, silver tested its historic high of $50-per-ounce set in 1980. But you can trade silver without breaking the bank and claim a piece of the glittery gains. While you can't actually buy silver on a stock market, you can invest in silver through various securities.
Silver Funds and Stocks
Research stocks, mutual funds and exchange-traded funds (ETFs) that specialize in silver. Read the prospectus of the iShares Silver Trust (SLV) ETF, or any prospectus with a slant on silver, to get acquainted with the terminology and figures. If you're searching for a fund backed by the physical bullion, the ETFS Physical Silver Shares holds the metal in a custodial account. Select a minimum of three or four stocks to research, and resist the dazzle of promises.
Compare your stock or fund picks. Look at the historic earnings and growth rates of the stock. The forecast for silver usage is robust, with a 36 percent increase in usage projected over the next five years, according to the 2011 Bedford Report. You want to buy stock that can go the distance.
Scrutinize previous earnings reports and factor in what the company projected for future growth. Note whether or not it met its earnings, and get a clear understanding of the methodology the company uses to forecast growth. Keep track of which companies had stock prices that increased in tandem and direct correlation with the rise of physical silver prices.
Purchase your selected shares through your broker account. For long-term investors, you must remember that silver is impacted by the economic news and also attractive to investors looking for a hedge against inflation. Since you're buying an equity traded on an exchange, you have the expectation that the stock will go up in value. Buying shares of a fund that focuses on silver should adhere to the same fundamental trading and investing principles for any other equity.
Protect your trade and use appropriate stop-losses to automatically close your position when a price point is triggered.
Silver, like any other commodity or equity has cycles of expansion and contraction. No matter how high the price rises, it can plummet with your profit in tow.
- Thomas Northcut/Photodisc/Getty Images