Gold, undoubtedly still the first preference after currency when it comes to investing. Nevertheless, the concept of investing in alternatives like Silver is also getting hype. Silver is precious, a lustrous metal known for its embellishing look. Eventually, the financial spotlight fell on Silver, and its price got upstaged.
There can be many reasons why Silver is outperforming gold, i.e., cheap alternatives with good properties. With the investing world boasting about Silver, many people have recently shown interest in investing in Silver. Many experts, however, have put forth their opinion about the downside of investing in Silver. Today I will talk about why Silver is a Bad investment? Read the article if you want to know which thing to invest in and why it should not be Silver.
9 Reasons Why Silver Is a Bad Investment
Here, I am explicitly using the term investment to give you an idea of traditional investment from the perspective of Silver. It does not mean you should throw away all the Silver you own, but you might disagree with me regarding investment here.
Silver beyond the shadow of a doubt is a valuable metal. Still, there are many reasons why you should drop the idea of investing in Silver. Excessive supply of Silver compared to gold will always hold back in becoming high price metal. Additionally, the investment market of Silver is minimal, and the number of people investing in Silver also is in small measure. The risk factor will remain high unless the value for silver investment enhances or there is a surprisingly high demand for Silver out in the market.
Let me explain the top reason why financial experts never recommend you to invest in a bar of Silver.
1. Price Fluctuation
No one is unaware that precious metals are volatile and fluctuate in price. There is an equal probability of profit and loss if I get my point across. Investing in a precious metal can be mired by emotional investment. Thus, it would be best to mind all the p’s and q’s when investing in Silver.
Try to ensure the lowest possible price while buying it and stick to a little high price to make a good profit. It can be challenging as a mostly silver investment is an emotive decision. You might be now coming to the point why not invest in Silver. Keep reading for further information.
The most crucial factor that prevents people from investing in Silver is its low price compared to gold. Gold is available in chunks, but its value remains higher while the Price of Silver can fluctuate rapidly. There is always the possibility of dropping silver prices when the stock market crashes, like 2008.
2. Buy Fake Silver.
Another problem with investing in Silver is that there is a large variety of fake Silver, easily accessible to everyone. Not all people have the eyes to differentiate between counterfeit and genuine Silver, and they invest in the fake one. This will not return any profit; instead, they will face considerable losses.
Over and above that, not all silver dealers are honest with their clients. Thus, it is much harder to find the right dealer and buy real Silver. This might seem far-fetched, but it happens all the time, and people don’t even realize it. Now, with such a high-risk factor, you might agree with me that Silver is a bad investment.
3. Probability Of Loss
Silver being a physical metal can get stolen or damaged. With all that happening, what will be the net consequences? Yes, you will lose your investment if your silver bar gets damaged or in the hands of thieves.
This risk, however, can be lessened by keeping the Silver in the safe or the bank but the risk of silver getting damaged still exists. Silver bullion can be minted into coins or bars. You can store it in a safe or locker, but a fire can play havoc with your investment, and it can be hard for you to recover from it.
Silver with symbol Ag and atomic number 47 has a melting temperature of 1,763°f, which can cause severe damage to your investment. Suppose some unexpected fire reaches your house. It will only take a few minutes to go over 1100 degrees Fahrenheit. Even if the fire does not damage the Silver, it can leave acidic soot or film, eating the surface. Moreover, you can lose your coins or bullions and hence your investment.
4. No Fixed Price Per Ounce
You cannot analyze the price of Silver upon income basis, expenses, or how much profit potential it has. Silver is a valuable metal, but you do not have any fixed price per ounce. The price per ounce of Silver is what people are willing to pay for it.
This can be another reason why Silver is a bad investment. The price of Silver depends upon the outside factors you cannot change, i.e., supply and demand. Unlike other businesses, Silver cannot be backed by such information. You cannot validate the price with silver investment upon data or financial statements. It depends on other factors like market cap, gold to silver ratio, and buffet indicator.
5. Consequences Of Deflationary Events
Silver is a fragile investment. Gold and Silver can protect your money in a time of inflation, and the precious metals are correlated. They share a positive relation with implied volatility. When the dollar value decreases, the value of silver increases and vice versa. While this can be a good thing in bringing the price of Silver up and betterment of the economy, inflation needs to be balanced.
Deflation can also influence your investment. While inflation decreases the dollar’s worth over time, deflation enhances it even more.
As Silver is inversely related to inflation, the price of Silver can go down in economic hardship. Deflation has a substantial impact on market changes. Thus, the cost of Silver can be crashed at any time depending on the world’s events. As you cannot control deflation, investing depends on fate, proving Silver is a bad investment.
6. Storage Fee
Physical Silver can be the safest type of Silver to invest in. However, the drawbacks cannot be neglected. You will have to store a silver bar somewhere, and it can be challenging if you do not have a safe or locker within your home premises.
You can keep it at the bank, but buying or renting a safe deposit box costs you a lot of money. There will be a recurring fee that can reduce your potential for monthly returns. Price can range from $20 to $200 a year, depending on the size and location of the box.
If you buy lots of silver bars, you will need a huge storage place. Many companies provide you with the facility of storing your billions so you can be relaxed, but again this is going to be a long-term expense and can influence your investment.
7. Not a Profitable Investment
The silver mining companies working globally and trading physical Silver provide you with reliable profit. Other than that, Silver can not pay you any income. This can be considered a primary point of why not invest in Silver. Having an investment that depends exclusively on increased price can dull the attraction of investing. You will have to look for an alternative way of making cash if it was your retirement fund or selling the Silver.
There are many ways to generate income. But creating income by selling your assets will not give you any profit. As mentioned above, Silver is volatile, and with time it keeps on increasing. You can hence end up selling Silver for less and less amount.
Even if you invest in a silver mining stock that pays an income or dividends, even when the prices of silver drop income of miner are going to decrease. With time, it will reduce and affect the overall dividend badly.
8. Have To Make Investment on Right Time
The only way to benefit from silver investment is to know the right time to invest, unlike other businesses. So, you have to time the market to look for the right top and bottom prices to buy and sell the Silver. There can be ways to evaluate the right time to buy and sell, but there is no promised time when the bottom has come or when you can buy the Silver at low prices.
This factor again is not negligible and proves Silver is a bad investment. Let’s talk further and move to our next aspect
9. Values Can Alter on Fear Basis
Fear has a powerful influence on investing in a precious metal market. It can upsurge prices rapidly while it can do utterly opposite at times.
According to some investors, prices of Silver can be altered by fear and sometimes beyond logic. Prices can go up or down as people sell Silver or invest more in Silver to save money. Let me explain how fear affects investment with an example.
In covid-19, the prices of Silver dropped and affected the overall market. People became in need of money and liquidated the stocks and holding. Beyond that, they started selling their physical Silver. With factories and companies halted, there was no new production of products using Silver. The surplus of silver-based investment resulted in lowering its price.
You should be clear that people can dump their Silver when they are scared as they need money to live or start investing in metals, hoping to stay safe from inflation.
Risk Factor Involved in Silver Investment
After knowing all the possible reasons why Silver is a bad investment, you might be interested in learning the risk factor of Silver Investment.
1. Susceptible To Recession
The price of Silver depends on industrial growth. The cost of Silver is uncertain, and this is one of the significant risks if you are thinking about investing in Silver. If an economy falls down, the price of Silver will drop down rapidly. The value of Silver alters with its demand, if the demand is high, the price will be increased, and if the demand is low, the price will also decrease.
2. Reduced Income
Investing in Silver does not promise you to pay any dividend like stocks, so the income is limited in investing in Silver. The only way to profit is to buy Silver at a low price and sell it at a high price.
3. Sensitive To the Technology Shift
Further moving to why not invest in Silver, it can be replaced with other metals, and if the use of Silver declines, it will badly affect the price.
4. Inconstant Raise in Price
Silver can be used for multiple reasons; hence, the price fluctuates. You might face the difficulty of investing in Silver at the right time and right point. If you are a beginner investor, you might end up buying Silver at high prices as it has a questionable future.
List of Commonly Asked Questions and Answers on a Website About Topics “Why Silver Is a Bad Investment”
Q1. Will silver be worth more than gold?
Silver is more volatile than gold. While Silver is mined eight times the rate of gold, gold is 70 times more valuable than Silver. However, with minor fluctuations in price, gold is a stable investment choice while silver prices fluctuate. So, Silver will not be worth more than gold unless there is a drastic economic shift.
Q2. What is a good amount of Silver to own?
An average person should own 0.385 ounces of Silver.
Q3. Is investing in Silver a good decision?
Silver no doubt has a questionable future, but it is a precious metal that can bring you a good return if you invest in it. Comparing the prices of Silver with other assets, it is not yet overvalued.
Silver investment may give you benefits, but the downside of investing in Silver is more prominent. You should know why Silver is a bad investment because the risk factors are too high. If you want to invest in Silver, first address all the risk factors. After analyzing all the aspects, judge by yourself whether you should invest in Silver or not.