How to invest in silver with six easy steps



This is a guest post by Mike W

Investing in silver can be an intimidating process to new buyers, but once you understand the basics, it is actually quite simple. The aim of this article is to educate beginner investors on the nuances of silver, as well as to explain the best ways to accumulate silver without overpaying or getting scammed.

I have broken the article into three portions: first I discuss the various forms of silver that are commonly purchased as investments, then I discuss the best ways to buy physical silver, and I close with the best methods for storing and protecting your silver.

Forms of Silver

There are four primarily traded forms of physical silver: silver bars, silver coins, silver rounds, and junk silver. I will explain the advantages of each form below:

Silver Bars

Silver bars are rectangular shaped pieces of metal that are comprised of .999 fine silver. Bars regularly come in 1 oz, 5 oz, 10 oz, and 100 oz weights, and are produced by private as well as government mints.

Some of the most well-known producers of silver bars are Johnson Matthey, Engelhard, SilverTowne, NTR Metals, Highland, Northwestern Territorial Mint, and PAMP Suisse. Each manufacturer offers their own designs, and certain producers like Johnson Matthey or Engelhard often command higher premiums over spot than lesser-known companies like NTR or SilverTowne.

Advantages of Silver Bars

· Due to the fact that any private mint can produce silver bars, they typically carry lesser premiums over spot than silver coins, which can only be produced by government mints.

· Larger bars, such as 10 oz or 100 oz sizes, carry less of a manufacturing premium over spot than smaller bars or rounds, so they are often the cheapest way to purchase .999 fine physical silver.

· Silver bars of the same size and brand are easily stacked, making storage simple and efficient.

Silver Coins

Silver coins are circular pieces of metal that are composed of .999 fine, or sometimes .9999 fine silver. Coins virtually always come in 1 oz weights, and are only produced by government mints. The majority of silver coins also carry a face value as currency in their country of production.

Two of the most popular silver coins in North American are the American Silver Eagle (.999 fine, 1 troy oz. $1 USD face value) and the Canadian Silver Maple Leaf (.9999 fine, 1 troy oz, $5 CAD face value). Both of these coins carry a higher premium over spot than identically sized silver bars or rounds, which is due to their additional value as collectibles/official government coins.

Silver coins can be purchased from dealers individually, in tubes, or in Monster Boxes. American Silver Eagles come in tubes of 20 coins or in Monster Boxes of 500 coins, while Canadian Silver Maple Leafs come in tubes of 25 coins or in Monster Boxes of 500 coins.

By purchasing sealed tubes or Monster Boxes from dealers, you can rest assured that your coins are in the exact same condition as when they left the US or Royal Canadian Mints. Most dealers also offer a price break when you buy in tube or Monster Box sized lots.

Advantages of Silver Coins

· Silver coins are extremely well-recognized and liquid, especially within the country in which they were produced.

· By purchasing sealed tubes or Monster Boxes, you receive brand new coins that are easily stored and maintained.

· Although silver coins carry a premium over bars, rounds, or junk silver, you can often recoup that premium in the resale market. For example, we sell 2012 American Silver Eagles as low as $2.45/oz over spot, and buy them back at $1.90/oz over spot.

Silver Rounds

Silver rounds appear almost the same as silver coins, with the main difference being that any private mint can produce silver rounds, while only government mints can produce silver coins. This distinction allows a lower fabrication premium for rounds than silver coins.

Companies including NTR Metals, Northwestern Territorial Mint, Sunshine Minting, Engelhard, and virtually any other private mint commonly produce silver rounds. Rounds typically come in sealed tubes of 20 pieces, and almost always weigh 1 troy ounce and are composed of .999 fine silver. Smaller and larger rounds are available, but the vast majority you will find will be of the 1 troy ounce size.

Advantages of Silver Rounds

· Just like silver bars, rounds often carry the lowest premiums over spot price for .999 fine bullion.

· Rounds come in sealed tubes of 20, making them very easy to store and protect.

· Buying large lots of 1 oz silver rounds will be nearly as cheap as buying larger 100 oz silver bars, while still offering the divisibility of smaller sized pieces.

Junk Silver

Junk silver refers to pre-1965 US coins including nickels, dimes, quarters, half-dollars, and dollars, which are composed of either 90% or 40% silver. These coins are typically sold in bags with face values of $100, $250, $500, or $1,000.

Each coin’s face value is directly proportional to the coin’s silver content, so for example two 90% quarters would contain the exact same amount of silver as one 90% half-dollar or five 90% dimes. Because of this, most dealers offer mixed bags of 90% or 40% coins, which will contain a variety of coins totaling $1,000 in face value.

Unlike bars, coins, or rounds, junk silver is not stamped with a silver weight or purity, which does make it harder to understand/value for someone who isn’t “silver savvy”.

Advantages of Junk Silver

· Junk silver always offers the lowest premium over spot as compared to bars, rounds, or coins. This is due to the fact that junk silver is not classified as bullion due to its 90% or 40% silver content, as well as the fact that the dealers don’t have to melt or refine the coins to sell them.

· Junk silver is the easiest form of silver to “piece out”, as you will have thousands of individual pieces per $1,000 face value bag. This makes junk silver a useful bargaining tool in a “SHTF” situation.

Where to Buy

Now that we’ve covered the four common forms of physical silver, let’s discuss where to buy these products. When searching out physical silver, you have two primary options: buying online or buying in person.

Buying Online

Buying online is primarily accomplished by locating an online precious metals dealer and placing a buy order. Other methods do exist, such as buying via eBay or buying in person-to-person transactions via forums, but I would recommend dealing with a reputable company as opposed to an individual you found online.

When evaluating bullion dealers, there are a few key criteria you should consider:

· Reputation – in my opinion, this is most important. There is no benefit to finding an extremely low price on silver if the dealer takes forever to ship (or never even ships) your products. I would recommend doing independent research on the website by Googling terms like “(website) complaints” or “(website) reviews”. Evaluating other customers’ online feedback is the best way to get a feel for how the company conducts their business, and if the company is a complete scam you will find tons of negative reviews online immediately.

· Product Selection – some dealers boost their margins by only offering highly priced silver products such as Proof coins or brand name bars, which results in the customers paying an extremely high markup over spot. Make sure to shop around and never pay anything more than a few bucks over spot no matter what product you are buying.

· Pricing – the easiest way to compare pricing is to look at several online dealer’s sell prices for the exact same products. Pricing can vary quite a bit depending on brand, condition, etc, so make sure you are comparing the same exact products dealer vs. dealer. Another aspect of pricing is to evaluate final, out the door costs, which may include shipping, insurance, commission, etc. Many companies will list very low pricing, but by the time you pay all the other fees the deal isn’t so good.

· Read the Terms – always make sure to review a dealer’s terms and conditions before you make a purchase. Virtually every online dealer will have stiff cancellation fees as well as Market Loss fees, which you want to be aware of before placing an order. You should also be very clear on how long you have to remit payment, as late payments will almost always be refused. Also make sure the dealer ships insured and with Signature confirmation to assure that your product doesn’t end up in the wrong hands.

· Make a Call – I suggest placing your first order with any company over the phone as opposed to online. It always helps to have a personal contact at the company, and by dealing over the phone you can clarify any questions or concerns you may have.

How to Store

Once the silver is in your hands, you then need to store and protect it from theft or damage. Some investors choose to use safety deposit boxes at a bank, but the preferred method is to keep the silver on hand in case of emergency. When storing silver at home, there are two rules: discretion and protection.

As far as discretion goes, you shouldn’t tell anyone about the valuable metal you are storing at your house. It may be tempting to show off your shiny new purchases, but every person you tell becomes a liability not only to rob you, but also to tell others about your valuables.

For protection, I recommend purchasing a safe that is fireproof. Most consumer safes can be bolted to the floor or wall, which adds a further layer of protection against theft. By purchasing a decent safe, bolting it to the wall, and never telling anyone what you are holding, you put yourself in a safe position against theft or damage to your metals.

M.D. Adds: Also another useful resource is www.goldshark.com, it let’s you compare pricing on all sorts of silver products from different dealers. And www.buysilver.net – it is an informational site that covers a lot about buying physical silver.

Comments

  1. village idiot says:

    Mike W., very good article that covers the subject from A-Z. I will mention that 40% coin is 1965-1970 half dollars just so people will remember to save them if they come across them. And nickels were only made of silver during the WWII years. Back in the day I could go to the bank and they would allow me to go through their coins and trade them for the silver coins I could find. Not any more. Take care.

    • Casey in CA says:

      War nickels are 35% silver and can be separated by the mint mark above the dome on the reverse side of the coin. In 42 they were made in both compositions thus the mint mark to separate the 35% silver from the nickel composition nickels.

  2. Great post. Clear, concise and a good primer for someone just starting in silver.

  3. axelsteve says:

    That was a good article,However no one mentions buying from a reputable coin shop. I see a few advantages of doing that. You can buy anomously.No record of payment other then cash or shipping records. You may pay a premium but you do with anyone anyway.You keep it local and no waiting for shipping.You can use a check and no one knows what you bought.I could tell homeland insecruty that I bought a proof set for my niece in Portland.

    • You are correct, I totally forgot to include the portion on buying locally. You outlined the main advantages of buying locally, namely:

      - anonymity
      - no waiting for shipping
      - product is in your hands immediately

      The only drawback in my experience is you usually end up paying more than you do online, but if you can find good deals locally then take advantage by all means!

  4. I have never understood how to determine to value of “junk silver” based on spot silver prices. If an ounce of silver is worth X how do you determine the value of $1.00 face value of 90% silver coins and/or 40% silver coins. Is there some type of formula that I can use?

    I would not purchase silver bars as I can see a potential argument over silver content. I think I will stick with U.S. and Candian coins and “junk silver” if someone can help a poor dumb retired GI. MSgt

    • Casey in CA says:

      The best place to look at the value of junk silver is at coinflation.com

    • MSgt….. Coinflation.com scroll down to ‘Melt calculator’ and use the price and wieght scales to help with the math…. its really a KISS way of doing this sort of thing.

    • Becomes the Bear says:

      MSgt- Go to www(dot)coinflation(dot)com and look down at the silver coin prices. Take the value of a silver dime and multiply by 10. That value is the price of a face $1.00 of junk silver coins in 90% silver. Today that would be $22.28. Easiest way I have found not using a calculator. For the 40% halves, just double the value listed for a 40% half dollar- $9.11 today.
      BTB

    • Hunker-Down says:

      MSgt,

      Here is a place with an explanation. I have not purchased there.

      http://junksilvercoins.com/values

      The face value never changes but the silver value changes every day.

    • In light of the Internet being down, as I posted on one of the other “silver” posts 5 days ago…

      If you want to determine the silver value of a coin, you could use the following as a baseline:

      Dimes have 0.0724 troy ounces
      Quarters have 0.1809 troy ounces
      Half-Dollars have 0.3618 troy ounces
      Silver-Dollars have 0.7736 troy ounces

      So, say for example Silver is posted at $30 per troy ounce you would expect the following:

      Dime – 0.0724 x 30 = $2.17
      Quarter – 0.1809 x 30 = $5.42
      Half-Dollar – 0.3618 x 30 = $10.85
      Dollar – 0.7736 x 30 = $23.20

    • SC Redneck says:

      Each dollar of face value contains .7735 ounce of pure silver.

  5. Great article Mike W. Did a good job of covering the basics. My preference for buying American Eagles or silver bars online is Northwest Territorial Mint (I am not affilliated with them in any way). They have a large selection. If you purchase over 50oz they ship for free and guarentee to buy back any item they have sold you. I have both bought and sold to them without any problem.
    Keep the Faith

  6. Thanks for the primer. I was lucky, as I didn’t get hurt learning how this worked as I have with other things. PM’s I understand, stock/mutual funds to a much lesser degree. I no longer take “professional” investment advise over my own, as I seem to make and keep more money when I do it myself.

    • livinglife says:

      one of my hunting buddies worked for an investment firm and was told he needed to let the company take care of his funds, his 100k quickly became 15k. He took his remaining money back and started betting on sports games and made his money back and then some. Then went back to his own methods and did better.

  7. Outstanding info…thanks!

  8. Hi All,

    I am thinking about buying some American Silver Eagles through the link above (J.M. Bullion). First, is this a good price? Second, does anyone remember the special code the guy from J.M. Bullion gave us for 5 percent off your first order? Third, should I get the shipping insurance?

  9. This guy basically copied the learning guide from the website you posted about in the recent past. JM Bullion gives the exact same information. http://www.jmbullion.com/guide/

    • Hi Drew,

      I actually am one of the employees of JM Bullion, so I did write both of those articles, thus the similarity in information.

      • Awesome! In that case give this guy the $100!! I just bought some silver from you guys and the process was smooth and harmless. Got my silver delivered in the anonymous packaging(I even didn’t know what the package was and I was expecting it) in under 5 days. Can’t say enough about the professionalism of this site. I’ll buy from them again for sure!

  10. livinglife says:

    Discretion is highly important. In 1994 my in laws neighbor was having some landscape work done. They had silver bars stacked on the basement floor uncovered, several million dollars worth. Like idiots they told the landscapers they had to be done Thursday because they were going out of town that evening. Friday a large truck shows up as one had every day, no one was suspicious. Wheel barrows left the back yard and went into the truck. When the couple returned they discovered the theft, since they had not disclosed the silver to their insurance company, they were not covered for the entire loss, just maximum amount of house content, about $100k. Landscapers never showed up for work on Friday or Monday…

  11. stream148 says:

    Msg.
    the silver weight formula is as follows
    dime = .07234 oz of silver
    quarter = .0739 oz of silver
    half dolla 1964 and olderr = .36169 oz silver
    1965-1979 1/2 dollar is 40% silver and the wieght = .14792
    so for any of these coins, multiply the number of coins times the factor = amount of silver in ounces

  12. stream148 says:

    er, correction, should be 1965- 1970 for the 40% half dollars
    after 1970, no silver in them

  13. fyi … You are subject to having your sales of silver issued as taxable income if you .. currently .. sell 1000 ozs. or more. Local shops will tell you to break up your sales to avoid this. Bulk dealers / online / through the mail sales could cost you dearly should you decide to ‘Cash Out’. Nothing to say Uncle Surgar won’t lower that taxable level in the future.

    Thank You Mike W. I really hope this gets some more of the pack stacking some small amount of PMs along with the beans and rice. My DD was up to visit and ‘we’ went up to my favorite shop in Mich. (no sales tax added in Mi) and picked up a tube of bright 1959 dimes, She will balance her PMs nicely on a monthly average basis.

  14. MSgt The website coinflation.com has a current value chart for the “junk” silver coins & a secondary page w/the formulas for calculating values of the coins. And thanks for your service. I was Sgt USMC.

  15. Great article, Mike. Thanks for putting all of this information in one article.

  16. My only concern in dealing with the Northwest Territorial Mint was that they took 3 months to deliver my order. Any thing can happen in 3 months.

    I am going to try to deal with our local coin dealer. They are part of a firm that that have had a jewelry in town for many years. I have not gone there to price their coins as yet but at least I know they are reputable.

    • Three months to deliver! Ouch. You are right, anything can happen over 3 months… I would believe working with a local dealer would be better, as it would place the items in your hand at time of purchase, even if they do charge a premium for the convenience.

      • Just from my reading around here, buying locally for something sensitive like this is worrisome to some because of OPSEC. I guess the seller now knows you’re a silver collector/investor and because they’re local they’re more at risk of outing you in a SHTF situation? I’m not too sure.

  17. Thank you Mike W for the article. I dont know anything about gold let alone silver.This was very informative.

  18. Becomes the Bear says:

    A coin dealer that you trust is an excellent source as long as you can get a good price. Usually mine sells at about 50 cents over spot. Another good source if you know what you are looking at is a coin auction. By waiting until near the end of the auction (when most other bidders are tapped out) to start bidding, I have been able to get “junk” silver coins for up to $5 or more under spot price. Most auctioneers only take cash or in-town checks but it can be very profitable if no coin dealers are there. Most don’t touch junk coins anyway. A good website to search is www(dot)auctionzip(dot)com.

    BTB

  19. I work part time at a coin shop and I tell people that buy from us and not online is so if something is wrong they can come back and choke the owner over the counter but not the online guy. I have nothing against online sales but I don’t want to wait for delivery and also the shipping fees. At a coin shop or any other business you will pay a little over the price, it’s called margin. You pay when you buy and pay when you sell. This is how businesses keep the lights on and pay employees. Call around your area and ask what the price is on their 90% silver. Usually they will say 20x face or 22x face. This means multiply each coin by 20 or 22. A dime would be $2.20 each and so on. This usually includes the margin built in.

  20. Linda,
    I had a very similar experience with Northwest Territorial Mint. My order was placed in April, I got it in August. In the meantime, they sent me one e-mail telling me there was going to be a delay and I should get the order early summer. I got a second e-mail from them which made no sense, about 6 weeks later stating that due to high demand, they had to service those in que first. Not sure how I was in que in April and dropped into the black hole in June. The shipment finally arrived but I don’t plan to do business with them again.

  21. I once thought of myself as a pretty smart fellow so I opened a ‘silver’ IRA with “GoldLine”. Or so I thought I had. As it turns out Goldline does not in fact hold either the IRA nor the Silver. A second party holds the former and claims you have a piece of a common pool of the later. As no one cared to ‘show me the money… Silver’ I decided not the ‘fund’ the account. I was out the reg. and storage fees for the first year. Far less expensive than it would have been if I had not done the homework I neglected to do … before .. I opened the account.

    And so sayith the Gawds of Commodities …. “You don’t hold it … You don’t own it.”

  22. Junk silver is the only way to go, it is easily identifiable and hard to counterfeit.

  23. I have no trust in any services, banks, or storage facilities when it comes to my precious metals. I buy locally with cash and expect privacy. Additionally, I don’t tell people how much if any that I have and never show them where it is or talk about where I hide things.

    The one thing I will never do is send my money to someone while waiting for my silver or gold to arrive. Secondly, I won’t be placing money in ETF silver and gold funds or stocks that hold precious metals. This really defeats the purpose of having your goodies through a collapse.

    FInally, I go with junk silver because it is finely divisible for things like buying tool or loaf of bread or some fresh corn. I would hate to have to hand over a gold coin or a one ounce silver coin for a lesser in value item.

  24. On the subject of Gold & Silver ETF’s I tell our customers if they think the ETF has their PM in hand then call them and ask for your PM. The ETF will send you a check but not the PM.

  25. What would you recommend for a Canadian newbie? Where would be good to buy the Canadian Silver Maple Leaf, in Canada? (I imagine it would be way too complicated to ship over the border). And is there Canadian junk silver too? What coins should I be looking for in my change? (not likely I guess as it will be well picked over, right?)

    • village idiot says:

      Natalia, I’m not a Canadian, but I do buy Maple Leafs cause they are so beautiful, and I love me some Canadian silver dollars. Canadian dimes, quarters and half-dollars were 80% silver through 1967, and then some coins(quarters and dimes) were 50% silver in 1968. I’m doing this from memory, but I think it’s pretty close. Years ago I used to find Canadian silver coins, especially dimes, here in the US. Haven’t seen anything but pennies for several years, darn it.

      • VI, thank you for the reply. Sorry it took so long to check back here.

        I agree, the Maple Leafs are beautiful. And I”m glad for the tips on which coins have silver, so thank you very much!