Silver has been widely considered a precious metal for centuries, and its value has stood the test of time.
As a store of value and an industrial metal, silver has become a popular investment option for many.
However, determining the right amount of silver to own in your portfolio can be a tricky task. In this post, we’ll explore how silver can be allocated in a diversified portfolio, consider the pros and cons of physical and digital silver, and examine how this might change during a financial crisis.
The Average Silver Allocation in a Portfolio
When it comes to precious metal investments, the average allocation in a diversified portfolio is around 5-10%. However, it’s essential to note that this is just a general guideline, and the ideal allocation for you may be different.
Physical vs Digital Silver
When it comes to investing in silver, the options can be categorised into: physical silver and digital silver. Physical silver includes bullion coins, bars, and rounds, while digital silver covers avenues such as exchange-traded funds (ETFs), digital tokens, and other forms of digitally represented silver ownership.
Physical silver has the advantage of being a tangible asset that can be stored and held in one’s possession. Additionally, owning physical silver can provide a sense of satisfaction and security from an asset that legally belongs to the holder through full title ownership.
On the other hand, digital silver offers the convenience and liquidity of electronic trading. It can be bought and sold quickly and easily, and stored in a digital wallet or brokerage account. It is therefore a great option for those who plan on trading their silver on a regular basis.
For those who are seeking to reap the benefits of silver in both its forms, Kinesis Silver (KAG) offers holders all the ease of a digital currency with the added benefit of physical ownership. Each KAG is backed by one ounce of fine silver stored in fully insured and audited vaults, in your name.
Ultimately, the decision between physical and digital silver comes down to personal preference and the specific investment goals of an individual.
Silver Investing During a Financial Crisis
During a financial crisis, the value of traditional investments such as stocks, bonds, and real estate can experience significant declines. In such cases, many investors turn to safe-haven assets like precious metals, including silver, as a way to protect their wealth and preserve purchasing power.
Investors can achieve a degree of protection from inflation and market volatility when they hold an allocation of silver in a diversified portfolio. It’s important to note, however, that the value of silver can also be affected by economic downturns, as the demand for silver in industrial uses may decline.
Silver is a key component in a number of industries, most notably as a conductor for photovoltaic cells in solar energy and in a vast array of technology applications, including the rollout of 5G connectivity. Industrial demand for the metal is currently in significant demand with policies such as US President Joe Biden’s Inflation Reduction Act encouraging a huge shift away from fossil fuels in favour of renewable sources, particularly solar. Given the seismic shift the energy transition requires, silver demand is likely to prove more robust to any economic downturn than it has done in previous recessions.
A general guideline is for silver to be part of the 5-10% apportioned to precious metals, including gold, in an investment portfolio. It’s important to consider investing on a case-by-case basis, as well as the macroeconomic environment at play but the case for silver is looking stronger now than it has done for many years.
Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience in writing about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News.
As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewable energy and the challenges of avoiding greenwash while investing sustainably.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.