Silver is a great opportunity for investors who want to beat the recession. Precious metals are one of the top tools that investors use to ride out the storm of economic downturns, control losses in other parts of their portfolio, and inflation-proof their conservative assets.
Before you buy silver, you should know what you’re getting into. Here’s a short guide to everything you need to know about the metal.
Buy Silver Coins and Bars
Only buy fine silver coins and bars if you’re an investor. That means .999 purity or higher. The most common ways to buy the metal is as 1 oz silver coins or bars, and you can also find bars in 5 oz, 10 oz, 100 oz, or even larger weights.
When you buy silver bullion online, coins and bars are some of the most common products, and they come with lower costs over spot than products like collectible coins.
What Are Premiums Over Spot?
Spot silver prices are a benchmark set by futures contracts on how much 1 oz theoretically trades for, with no overhead costs or costs to bring it to market. It’s more or less a price for paper silver or the massive quantities traded by banks.
Since individual investors don’t live in that world, they have to pay for the costs of making coins, shipping, storing, and insuring them. These are premiums. Premiums tend to take up a greater proportion of silver prices than gold, largely because of shipping and storage costs – it’s easier to store much higher values of gold.
Do You Pay Taxes?
When you invest in stocks or bonds, you don’t pay a sales tax, you pay taxes on capital gains at the time of sale. It’s a different kind of product with a different kind of taxation model. When it comes to silver, it depends on where you are, how much you buy, and what form it takes.
While jewelry is taxed, silver bullion is not, though there are some important exceptions:
- In the UK, buyers must pay VAT, although gold is exempt
- In some states in the U.S., purchases under a certain threshold are subject to a sales tax, i.e. California ($1,500), Florida ($500), and New York ($1,000)
Look up local rules before you invest in silver so you know how much you have to pay.
Where Do You Store Silver?
That depends on how much you have. Retail investors can probably get away with a home safe. Keep it hidden, don’t advertise that you have it, and make sure you get it insured. Make sure coins are kept in plastic to avoid tarnishing, and that it’s airtight. At a certain point, you may want to consider moving or adding additional purchases to storage at a third-party, called allocated storage. Storing bullion metals at a bank is less than ideal, as most use unallocated storage – it’s all stored in a common vault.
Silver is a great asset to hold onto. Buy silver online, find a place to store it, find out whether you pay sales taxes on your purchase, and understand how to compare prices.