How Much Silver Should You Own?

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. Millions of investors check silver price charts daily to see how the precious metal is performing.

In this post, we’ll explore how you can include silver in a diversified portfolio. We’ll consider the pros and cons of physical and digital silver. Finally, we examine how exposure to the silver market might benefit you during a financial crisis.

The Average Silver Allocation in a Portfolio

Many analysts recommend holding an average allocation of 5-10% in gold and silver. It’s important to note that this is just a general guideline. Each investor has their own risk appetite and long-term goals so your ideal allocation may be different.

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 tangible items like silver bars, silver rounds, and silver bullion coins. You can hold, store, and trade items like silver coins.

Digital silver is a way of owning silver that doesn’t involve you having physical possession of the metal. This includes silver futures and exchange-traded funds (ETFs) that track the price of silver. Digital silver can also include digital tokens and other forms of digitally represented silver ownership.

For many investors, physical ownership and possession is important. It can give a sense of satisfaction and security because you know you have this asset that legally belongs to you, proven through full title ownership.

However, owning physical silver comes with its own set of challenges. Securely storing silver, particularly in large volumes, requires a safe or a vault. You can opt for third-party storage solutions like safety deposit boxes or a secure facility but this involves ongoing fees. In the interest of security, investors also consider insurance in case of theft, loss or damage. Liquidity is another factor. When you sell silver, you’ll have to transport it to a buyer or a dealer. They’ll then need to verify ownership, authenticity and purity which takes time.

Digital silver, on the other hand, offers the convenience and liquidity of electronic trading.

You can buy and sell silver easily in its digital forms. You store it in a digital wallet or a brokerage account. If you want to trade in silver regularly, digital versions are a lot more convenient. There are downsides, however. The ease of trading may mean more rapid price fluctuations, influenced by market sentiment and economic outlook.

There is a third option for investors who want the benefit of silver in both digital and physical forms, Kinesis Silver (KAG).

One ounce of fine silver backs every KAG, with legal title ownership in the name of the holder, held in fully insured, audited vaults. Unlike allocated digital silver where ownership remains with the seller. Kinesis platform users pay 0% storage fees to hold their metals in secured vaults.

Liquidity, often an issue with physical silver, is not a problem with KAG. You can easily trade, send, spend, or redeem your silver holdings. These are versatile digital assets that offer immense utility, with the added backing and steadfast stability of physical silver.

Ultimately, the decision between physical and digital silver comes down to personal preference and your specific investment goals. With KAG, you no longer need to choose between the tangible security of physical silver and the convenience of digital.

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. 

The price of silver (measured in troy ounces) can fall during economic downturns. This is particularly the case if industrial demand for silver falls. In these situations, the gold price may hold up better.

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.