Silver: Physical or ETC (Certificate)?
(from the series: Your question about precious metals- part 1)
Again and again I am linked under contributions to certain topics. Since my comments are also regularly longer, I therefore also need some time, I will try to publish the particularly detailed comments as an extra post. Advantage for the questioners: You get additional input and possibly reach.
Questioning from @Philinvest :
...I have now accumulated more cash in the last 5 months and would now like to invest this in silver. Do you think it makes sense to invest only in physical assets?
Or do you think that with commodities you should diversify with stocks/etfs and physical?...
Answer:
If you want to invest in (physical) silver, you should basically keep an eye on the tax. In the field of silver there is a difference between direct taxation and differential taxation. While with direct taxation the tax is clearly added with 7% to the silver price (in the table business you see then the tax portion and the portion of the silver price set up), you do not see the portion of the difference-taxed product. For the customer, this unfortunately results in a slightly shifted picture, namely the apparently non-existent tax, which, however, is already calculated in by the dealer. The differential taxation allows the dealer to pay only one tax from the difference EK and VK for non-European silver investments (coins and coin bars).
Well then.... The disadvantage for the private investor with both variants is nevertheless clear. Due to the tax surcharge, you are at a disadvantage right from the start with up to -12% return on the spot price. Because you pay not only the tax consideration, but also the handling costs of the dealer or the bank with in the VK.
Further points which you should consider are possible storage costs and the sheer quantity which is needed for such an investment. At present, one ounce coin in gold is equivalent to about 70 ounce coins in silver... Not to mention the safety of the storage.
ATTENTION: The above statements are currently valid in Germany 🇩🇪 . Austria 🇦🇹 (according to profile questioner) has a tax rate of 20% for payable silver: https://www.wko.at/branchen/handel/juwelen-uhren-kunst-antiquitaeten-briefmarken/umsatzsteuer-beim-verkauf-von-muenzen.html (no tax advice!) Thus the yield disadvantage at the beginning is equal at -20% to the spot price.
Is therefore now the investment in paper silver more recommendable?
Well, yes. It comes, as already mentioned elsewhere (mentioned here is my contribution to the topic silver investment AND my contribution to the topic gold investment; both:
see link tree in my profile) on the investment reason, or the scenario.
If you see the actual reason of the silver investment as an alternative to cash and as a nest egg, then nothing speaks against an investment in physical form. The advantage is the quick availability and the relatively easy handling (i.e. the possibility to exchange it into any form of commodity or fiat money).
However, if you see the silver investment only as a hedge against possible uncertainties on the stock market and do NOT consider a physical delivery, then the investment in paper silver or participating companies can be considered. Note, however, that this can also bring certain disadvantages! In the event of an emergency (a hypothetical collapse of the financial system), trading in the paper silver would no longer be readily available. Also, all forms of ETCs are a kind of certificate, which is usually backed by the corresponding precious metal or commodity, but this is not mandatory. Thus, you also bear the issuer risk, i.e. the risk that the provider of the corresponding certificate goes bankrupt. ETCs and certificates are unlike shares of companies NO special assets. So you would only have the vague hope that with deposited precious metals and the possible sale from the insolvency estate for you a crumb of the cake falls off.
So how to proceed in your specific case?
Ask yourself what your goal is. If you want to hedge a part of your portfolio and do not believe in the imminent collapse of the financial system, you can safely invest in corresponding paper silver shares. However, due to the risks just discussed, make sure that it is a commodity-backed ETC. Also keep in mind: To have a real impact on your portfolio, you need a significantly larger share of the portfolio than the usual 5%. In the range of 20-30% a corresponding effect would be noticeable.
If you only want to have a fraction, as a fiat money substitute and hedge in case of crisis, the investment in physical silver is recommended. I "recommend" even then always a stock of value of a new washing machine, a new stove, a new dishwasher and the good repair of the own passenger car. So all eventualities are taken care of.
Please note: For physical silver investments, "we" only buy bullion coins (Maple Leaf, Krugerrand, Britania, Eagle, Kangaroo, Panda or Philharmonic), silver bars or silver coin bars each in fine silver. Other coins or bars are NOT investment metals, but variations which are very expensive to buy and bring too high discounts when sold.
One thing is true for all commodity investments and for silver even more: It is with the investment in commodities always a strongly cyclical investment! Accordingly, one should expect high price ups and downs and be able to cope with them psychologically well.
Investments in precious metals are to be considered at least with 5 years investment period.
Since these are cyclical investment instruments, one should act anticyclically and buy or sell accordingly.
Good luck to you and yours! 🍀
What do you guys think about investing in silver?
What do you think of the present contribution format?
Thanks to@DonkeyInvestor for linking below the post. 🥕
The present contribution is not related to my professional opinion on the subject. I myself work professionally in the field of physical precious metals and give with this contribution only my personal opinion.
