You have to understand, what goes up must come down. This is true with gravity. This is true with the physical world and this is definitely true with financial markets. You don’t have to be a genius to figure this out. When you look at the US stock market during its complete lifetime, you would see key patterns where the market increases then it corrects itself. This is a predictable pattern. This is not any different from watching the tides roll in. This is not much different from watching waves at a beach. While the certainty of market corrections is a slam dunk, the timing such corrections is trickier. If people can predictably time when the market is going to correct itself, then the market would be filled with billionaires. The truth is nobody knows, and this is precisely why the stock market is so lucrative. After all, with lots of risk, you get lots of rewards. The good news is that you don’t have to play the market completely unprotected.
By investing in precious metals like silver coins, you can ensure that whatever correction the market goes through, you would be in a fairly safe place. Remember in a market correction your financial health is comparative. If you think you’ve lost some of your wealth, consider yourself lucky. If you compare yourself to others who lost it all, it’s really all relative. By positioning your assets in such a way, you can actually benefit from market corrections (When stocks suffer it has a positive effect on how high silver will end up going). There are certain investments you can get into that cannot only help you weather sharp downturns in the market but can also position you in such a way that you can make money of such downturns. Silver coins provide such protection. Keep reading below to find out why.
The Benefits of Investing in Silver
Silver’s Historic Role as a Store of Value
Unlike paper money which only has a value because the US government says it has value, precious metal by themselves has value. You only need to walk down the street and flash a piece of silver or a piece of gold and people would naturally be attracted to it. If you leave a piece of silver or a piece of gold on the street chances are it will be gone when you get back to it. That’s how powerful the historic role of silver is as a store of value. It is a measure of value. The same cannot be said with a blank piece of paper. If you put a colored blank piece of paper on the street chances are nobody would pick it up. It’s just a piece of paper. The reality is that the US dollar and other Fiat currencies are basically blank pieces of paper. The only writing on them that gives them value is that there is a guarantee by a government that that piece of paper has value. Once people lose trust in the government backing up that paper. That piece of paper goes back to being a worthless piece of paper. The same cannot be said of precious metals like silver coins.
Silver as an Inflation Hedge
It is precisely because of silver’s historical role as a store of value, and its widely acknowledge ability to store value that silver makes for a great hedge against inflation. Inflation is really a cheapening of money. As time goes by, every dollar you hold in your bank account goes down in value. The stuff that one dollar buys now, it can no longer buy ten years from now. That’s how inflation works. It rots your money. Silver keeps up with inflation. With each passing year as inflation goes up and as money becomes cheaper, precious metals keep up with the times. They allow you to hedge against inflation. In a very much the same way real estate keeps up with inflation.
Silver’s Industrial Demand
Another reason why silver will continue to have value in the future is the fact that there is an actual industrial need for silver. While gold is pretty to look at and there are a few industrial items that require gold, there are lots of industrial items and products that require silver. Silver is also needed in many industrial processes. Just judging by the demand of industry for this precious metal, silver will retain its value in the future. If you strip away its historical role as a store of value or its usage as jewelry silver will still be in demand. As a result, the price of silver will still be dictated by industrial demand. It will never lose value because there’s an industrial demand for it.
Silver’s Base Jewelry Demand
Throughout history, people have loved to wear silver jewelry. There is something about silver’s bright metallic glow that makes people gravitate to it. Considering the fact that gold is very expensive, people often consider silver as a secondary option for jewelry. Considering its lower price, there are a lot more people using silver jewelry. It is this popularity that ensures that there is a base demand for silver. Just like with the discussion about silver’s industrial demand above, the jewelry demand for silver persists through time. In fact, fact, in many countries, silver is preferred as jewelry. This is why silver coins are a great investment. They can be melted down into their base metal parts and converted into silver items, whether for industrial purposes or jewelry. In a same way, industrial silver and jewelry, silver can be converted into silver coins as well.
When Gold Goes Up…
Silver and gold tend to go hand in hand. When the price of gold goes up due to economic uncertainty, economic collapses, revolutions, political uncertainty, silver is sure to keep up with gold. Precious metals tend to be linked to each other. Of course, this link doesn’t necessarily automatic. Still, at the price of silver coins will go up when the price of base silver or silver bullion and silver bars go up due to uncertainty in the market. This is a great thing because gold tends to go up automatically when there is a lot of economic and political uncertainty. Silver tends to catch up with the appreciation of gold.
Silver Coins Have Their Own Investment Value
As mentioned above, silver as a metal is a historical store of value. Whether used for industry or for jewelry, silver makes for a great inflation hedge because it has a great intrinsic value. With that said, you actually increase your chances of making money with silver by buying silver coins. Why? Silver coins have their own intrinsic value. That’s right. Silver coins carry collectors value. Not only would people want to buy silver coins because of the base silver metal content that they have but because these silver coins go up with time. Just like with any collectors item, the rarer an item is the more expensive it gets. This holds true with silver coins. In fact, really old solver coins are worth more on a weight basis than the base metal that it contains. When you invest in silver coins, you’re really engaging in a two-pronged investment strategy. You are investing in the base value of the metal. Also, you are investing in the collector value of the silver coins. You get two streams of value when you invest in silver coins.
Silver is an Investment Haven During Financial Crisis
Just like with any other precious metal, when people start panicking about the health of the economy, or they get the jitters because of political instability, they flock to precious metals. Precious metals are very liquid, you can easily sell gold or silver in the market. Also, they are powerful stores of value as paper money loses its value and as political regimes come and go, people trust in precious metals remain the same. Since they are very easy to convert and their value remains over the long haul, silver makes for a great investment haven during financial crises. As mentioned above, silver coins add an extra layer of value because silver coins are also collectors items. So not only do you get more value from your collection of silver coins during a financial meltdown, but you can also sell them very quickly for both the collectors value premium and the value of the base metal that they contain.
Silver’s Accessibility is its Key Strength
A final key driver for the price of silver and silver’s resiliency during economic hard times is the fact that it is accessible. Unlike gold which can be quite expensive compared to silver, silver is much cheaper. As a result, more people would want to flock into silver. This can result on a percentage basis, higher rate of appreciation than with gold. Since gold is more inaccessible due to its price, it is easier to ride percentage price volatility with silver. In other words, you get more bang for your investment buck with silver because it’s more accessible. The downside to investing in silver coins and silver in general is that it’s so accessible that if the price spikes up too high, people might flood the market with their silver spoons, silver jewelry and industrial silver. This is what happened in the 80s when speculators try to corner the silver market.
Silver Coins, Bars, or Retirement Investing?
When buying silver bullion in either coins, bars, or rounds. There are some things to consider before choosing. For one, if you are interested in combining your retirement into precious metals, we recommend you use a silver IRA. We cover this in more detail at our “Precious Metals IRA Rollover” page. If you are simply looking to purchase bullion for your personal use, we highly recommend you check out our top 3 dealers.
Using Silver and Precious Metals as a Refuge During Market Crashes
As mentioned above, when the price of silver spikes up during market crashes and economic uncertainty, this is not an accident. The reason people do this is not because they are just afraid. While a fear does play a big part, there’s also a lot of strategy. Why? When you park most of your assets into silver during a market correction, you are essentially protecting yourself from further erosion in the market. If the market completely flat lines, the value of your silver spikes up. As a result, the value of your silver coins tends to offset whatever deterioration of net worth you suffered when your stock investments crashed. Precious metals, whether silver, palladium, platinum or gold has this core feature. People don’t flock to them for no reason. They form a great economic refuge during times of economic and political uncertainty. You can use this predictable pattern to your maximum advantage as a hedge in case the market goes south. At the very least, silver coins make for a great hedge investment that also diversifies your portfolio.
Converting Silver Assets to Scoop Up Depressed Blue Chips
Did you know that by buying silver coins, you are actually positioning yourself to make quite a bit of money when the market crashes? How? Very simple, by diversifying your IRA or your 401k into silver assets and your free investments into silver coins, you effectively come up with a hedge when the market slides down. Once the market crashes, you can then convert some of your silver assets into ready cash. You can then use this cash paired with the margin that you get from your broker to scoop up lots of depressed blue-chip stocks. Usually the market experiences a quick bounce up after a serious crash. You can then exit your margin positions when you get a quick spike and then retain some of your blue-chip stocks as profit. By riding the market up and down after a market crash using the liquidity provided by silver assets like silver coins, you can actually scoop up quite a bit of high-value stocks. These stocks of course weigh cheaper after a crash, but they still retain high value because they are proven money makers. By scooping up lots of high-value stocks right after a crash, thanks to silver, you can position yourself to making even more money once the market fully recovers.
Make no mistake about it. Investing in precious metals like silver coins not only help you weather sharp market downturns, but they can also help you position yourself to take advantage of market recoveries. At the very least, investing in precious metals help you stay liquid when you need liquid assets to take advantage of unique market opportunities. If silver is something you are not quite looking for, you can consider other metals such as gold. Investing into a gold IRA or just buying gold bullion are options you can take. So if you are interested in moving your 401(k) or IRA to a metal visit our complete resource (401(k) & IRA Rollover Options).
What to Do Next
Silver has its advantages and should be considered for anyone’s portfolio. Whether you are looking to purchase physical silver bullion or invest in the precious metals with a broker, both options are great and should be considered.
Here at Focus on the User we have gathered some popular resources to help you with your research of silver.
Will the Price of Silver Go Up in 2016?
It is never for certain where the prices of things will go, however silver is still a smart way to avoid inflation and protect your investments from a potential market crash. Even allocating a small percentage of your portfolio into precious metals will provide yourself with a buffer against potential stock crashes.
Best Silver Coins to Invest In
If you are still deciding which silver coins you should purchase, there are some coins that shine above the others such as the silver American Eagle or the silver Maple Leaf. These two coins for example are well known in the industry and are a beautiful coin to add to your collection.