In recently weeks, investing in silver has been gaining widespread attention – mainly fuelled by the #ShortSqueeze by Redditors on the WallStreetBets subreddit or WSB. WSB itself has grown its subscriber base to more than 8 million members – more than Singapore’s population!
On the back of Redditors entering silver investments, silver prices have surged to close to 8-year highs. Of course, those following the saga will also know that stocks such as GameStop, AMC Entertainments, Nokia and many more surged several hundred percent due to the influx of these investors.
As an investment, silver is a precious metal commonly used as a store of value (second only to gold). This makes it a good hedge against crisis and inflation, as it tends to retain its value better than a country’s currency or during a market crash. Silver is also used as jewellery and tableware, as well as for electronics, solar panel, medical equipment, and anti-bacterial purposes.
As silver is the latest target investment, we look at 5 ways investors in Singapore can gain exposure to silver. However, do note that any investment carries risk, and it is never advisable to invest based on speculation or “because you heard a friend say so”.
#1 Buying Physical Silver Bars And Coins
One of the most straightforward ways to invest in silver is to buy physical silver bars or coins. However, unlike buying gold bars and coins, silver isn’t as widely available – many jewellery outlets and pawnshops may not sell it.
Instead, we likely have to use a reputable seller. Many such sellers can be found online, including Silver Bullion, Bullion Star or others. When purchasing from these sources, we typically can arrange for physical delivery or with storage options.
When investing in physical silver, storage cost is going to be a consideration. It is probably impractical to store tens of thousands of dollars in physical silver bars on our own. In any case, we would need to also purchase a safe. Alternatively, storage options are typically available from the sources you purchase from, and can cost around 0.26% to 0.77%, or you can store it in a safe box in a bank.
#2 Opening A UOB Silver Savings Account
As far as we can tell, UOB is the only major bank to offer a Silver Savings Account. The UOB Silver Savings Account allows us to buy and sell silver without physical delivery. There is a minimum balance requirement of 10 ounces, and a minimum quantity per transaction of 10 ounces of silver. There is also a service charge of 0.2 ounces of silver per month or 0.375% per annum on the highest silver balance recorded in a calendar month (whichever is higher).
While not available for silver, UOB also sells physical gold bars and coins if we choose to invest in gold.
To open a Silver Savings Account, we have to go down to a UOB branch. Once the account is opened, we can transact at a UOB branch or online at any time between Mondays to Fridays 8am to 11pm (excluding public holidays).
#3 Investing In Silver ETFs
Another popular way to invest in silver is to invest via an Exchange Traded Fund (ETF). The ETF in the middle of the #SilverSqueeze saga is iShares Silver Trust (NYSE: SLV) or just commonly referred to as SLV.
Note that the SLV ETF is classified as a Specific Investment Product (or SIP), which means it is a more complex retail investment product.
By investing in SLV, we immediately gain exposure to silver. This allows us to trade our investments like we trade shares in our brokerage account. It tends to be more liquid and can invest as big or small an amount as we choose.
There are other silver ETFs, including the Aberdeen Standard Physical Silver Shares ETF (NYSE: SIVR) and the Invesco DB Silver Fund (NYSE: DBS).
When investing, we have to consider ETF management fees we are being charged, as well as the brokerage transaction costs. For example, there is a sponsor fee of 0.5% for the levied by the managers of SLV.
#4 Investing In Silver Unit Trust
We can also invest in precious metal or commodity unit trusts to gain exposure to silver. This is quite similar to investing in an ETF, except that unit trusts are not listed on an exchange, and we need to buy and sell it with a platform, such as FSMOne.
One other thing we need to note is that such unit trusts are typically invested in a basket of precious metals, and gold is usually the biggest component while silver (and other metals or commodities) comprise a smaller share. If we want to only gain exposure to silver and not the other metals, this may not be the ideal solution.
One such unit trust is the Schroder Alternative Solutions Commodity Fund. As stated in its factsheet, silver only comprises 5.6% of its portfolio, while gold comprises 13.6%. Other commodities are also comprised within the fund.
Similar to investing in ETFs, we have to consider fund management fees and transaction fees. For example, the ongoing charge for investing in 1.95%.
#5 Investing In Silver Mining Companies
Apart from investing in silver itself, we can also gain exposure to silver by investing in silver mining companies.
Some silver mining companies include Pan American Silver Corp (NYSE: PAAS), Hecla Mining (NYSE: HL), and many more. Similar to the rise in silver prices, silver mining companies have also seen their share prices typically rising in the past one-year period.
For example, both Pan American Silver Corp and Hecla Mining have seen their share price rise 43.8% and 78.2% in the past one-year period respectively. There are also fairly large companies, with a market capitalisation of US$6.7 billion and US$3.3 billion respectively.
#6 Trading Silver Contract For Differences (CFDs)
If we just want to gain short term exposure to silver, we can consider trading a silver CFD. This way, we don’t have to think about owning physical silver assets, either physically or within our investment portfolio.
We can utilising a trading platform, such as IG to trade commodities (amongst other products), including silver, gold, zinc, coffee, cotton, oil, and others.
By trading a CFD, we can also magnify our position to take advantage in small short-term fluctuations in share prices. Typically, we need a risk management strategy and an investment strategy to profit from trading.