The price of silver is finally on the rise again. Is it time to buy? And if it is, should you invest in the silver stock or should you actually buy the real deal? These questions are all important, but there’s another one that people tend to forget about until years later….when they actually want to sell their silver. How the heck do you get the full value of the silver when you want to sell?
It’s obviously no longer used as a currency (so no one knows how to accept it as a payment for something else), and you probably can’t just sell it back to the place where you bought it from – not for full value anyway.
You want to be wise with your money and your investments, but this stuff isn’t easy, so let me try to break it down and show you how to buy and sell silver, and if it will even benefit you in the long run.
How to Buy and Sell Silver
Liz and I have been talking about this for a few months now. We have money in the stock market and real estate, but we still don’t feel fully diversified. Just in case the whole economy tanked in the next couple of years, it would probably be wise to own some precious metals as a hedge to the fluctuations in the market. After all, when the economic outlook goes bleak, the value of precious metals often skyrockets. It’s a great thing to have when all of the shares of stock you own are in free-fall.
What’s the Best Way to Buy Silver?
When one begins to consider how to buy and sell silver, the initial question is typically:
“Should I just buy some shares of silver stock? Or should I actually buy the real deal and stash it in my house?”
I have actually gone back and forth on this in the past couple of years. There are pros and cons to each method. When it all comes down to it, here are the majors:
- It’s quick and easy to buy, and quick and easy to sell
- The transaction costs are minimal
- But, if the economy takes a serious dive, your electronic ownership of silver might mean absolutely nothing
Buying Real Silver
- It’s fairly easy to buy and get shipped to you
- If the economy tanks big time, owning real silver could be a huge benefit since it’s a high-value commodity
- But, the transaction costs of real silver are often 10% or more than the actual per-ounce value
- And, real silver can be difficult to sell
Basically, if you think that our economic future is going to tank worse than the Great Depression of 1929, then I would lean toward buying the real silver. If you think that there will be another recession where the stocks dip 50% or less (FYI, I’m in this camp), then I would probably lean toward owning shares that represent the value of silver.
How to Buy Real Silver
When searching “how to buy silver” online, guess who’s at the top of the search results? All the companies that sell silver! DO NOT TAKE ADVICE FROM THESE RESULTS. Learning how to buy silver from those that sell it is like asking an insurance agent if you need insurance. Of course you do, and here’s your bill for the next 40 years! Yeah…I don’t think so.
When I was planning to buy real silver, I scoured the internet for hours trying to find the best deal per ounce. In short, here are my findings:
1) Silver can be purchased safely online, but at a premium
LearCapital.com is a reputable site for buying silver, but they still add a premium to the spot price of silver. At this moment, the price of silver per ounce is $17.79, but you’ll pay $18.70 per ounce when buying through the site. Maybe even more if you elect to pay with Paypal or a credit card! This initial premium makes it tough to earn long-term cash from the get-go.
2) Buy Silver Through a Dealer
If you’d rather buy silver in person, I would recommend seeking out a dealer that’s backed by the U.S. Government. There’s likely one within 50 miles of your home and you’ll probably pay less of a premium than if you were to buy online
3) Scour eBay for Junk Silver
If you’re looking for cheap silver (in other words, without the hefty premium), then junk silver is probably your best bet. Coins that were minted prior to 1965 were typically made up of 90% silver. Be careful with this method though, as silver and gold are measured in troy ounces, not regular ounces. Don’t be fooled by the shady sellers quoting their weights in regular ounces.
4) Buy From the Local Pawn Shop
They don’t always have supply on hand, but pawn shops do get their hands on peoples’ silver from time to time. You’ll have to be careful once again not to pay a premium over the pure weight value, but at least you’ll be able to see and touch the silver before making the purchase.
As you can see, there really is no great way to buy physical silver. No matter how you go about it, you’ll typically have to pay a premium on top of the pure precious metal value. This is why I’m starting to lean toward purchasing shares of silver that flux very closely with the rise and fall of the value of silver.
If buying physical silver isn’t for you, how should you go about buying shares of silver online? From my perspective, there are basically three ways:
1) Buy Silver Shares (COMEX) Through a Brokerage
Companies like E-Trade, Scottrade, and TD Ameritrade are all examples of online brokerages where you can simply create a sign-in and choose to buy shares of COMEX through their brokerage. Each transaction likely costs $10 or less.
2) Buy ETF Silver Shares
Instead of investing in just one holding that mimics the movement in the value of silver, many choose to invest in ETFs that invest in multiple holdings of silver and flux even more closely to the value of silver. Examples are ticker symbols SLV, SIVR, and DBS. The transactional costs are typically the same – somewhere around $10 a trade.
3) Buy Motifs of Precious Metals
This is another interesting option that I stumbled upon a few years back. Motif Investing allows you to purchase multiple shares of stocks with a single purchase, which tremendously cuts down on transaction costs. At any given time, there is typically a “Precious Metals Motif” that consists of mining companies, gold holdings, and silver holdings. By purchasing just one category of motif, you can essentially diversify your holdings across many different precious metal companies. This is an option that I’m seriously looking into. (UPDATE: Motif Investing is no longer in operation. M1 Finance is a similar platform that’s often recommended.)
How to Sell Silver
If you decided to purchase silver as a paper share instead of the real deal, then the quandary of how to buy and sell silver is no big deal. You simply sign into your brokerage, hit sell, and pay the $10 transaction fee. No biggie. The problem around how to sell silver is with those that have bars hidden in their basements.
Let’s say that you still really want to buy physical silver these days. What will your exit plan be? How will you cash in on that silver in the future? As I see it, there are four ways to do it.
1) Sell to a Local Coin Dealer
The best option I have found is to sell your silver coins and bars to a local coin dealer. They’ll likely give you a little less than melt value for your silver (because they need to turn a profit), but you still might walk away with 90% of the silver’s value at that point in time. Given all the options, this isn’t a bad deal.
2) Sell On eBay
There are quite a few people interested in buying silver these days (with the apparent pending doom in our nation’s economy) and they’re flooding to sites like eBay because they don’t want to pay the premium rates of the online dealers. If you have silver to sell, eBay might be your ticket to getting the full amount of what they’re worth.
3) Sell to a Pawn Shop
Personally, I love the show “Pawn Stars”. There was once an episode where a 20-something punk brought in a huge hunk of silver and cashed it out for the full melt value of $110,000. As I understand it now, this would be a pretty rare occurrence. Most pawn shop owners wouldn’t give you anywhere near full melt value for the silver – especially since the value could fluctuate severely in just a couple of days. Pawn shops will likely buy your silver, but typically at 80% or less of melt value. Still, it might be worth a shot and ask what they’d give you!
4) Sell to an Online Dealer
I’m listing this as an option, but I wouldn’t recommend it. This is where you contact an online dealer, tell them you have silver to sell, they send you an envelope, you mail them the silver, and then they tell you what they’ll pay for it once they receive it. In other words, you give them the silver before you even know what they’ll pay you. It’s a pretty terrible system, and there are tons of scammers out there that just want you to send your precious metals and they never intend to send you a dime. If you choose this option, it might net you some money, but I’d be very careful with it!
The Downside of Buying Physical Silver
Buying actual silver is pretty cool and can make you feel quite powerful, but if you ever intend to cash them in, it can be a gigantic pain in the butt.
The Basic Downsides of Buying Physical Silver
- It can take weeks or months to sell your silver
- You’ll likely not get spot price for it when you do finally sell it
- Even if the value of silver goes up, you get dinged on the front and back end of the transaction, making it tough to earn money
Buying silver can cost you quite a lot of money and so can selling it. If you believe that our world economy is going to come to a screeching halt (thereby making silver extremely valuable), then it might still be worth buying up silver (since it is much lower than the highs of just a few years ago). But, if you think the economy will just hit a few bumps along the way to ultimate prosperity, then you might not want to mess with it at all.
Did this answer your question of how to buy and sell silver? What will you choose to do?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.