Silver Investing - Options For Your Self-Directed IRA

Those whose retirement funds are tied up in a 401k or 403b do not usually have a silver investing option. A small percentage of account holders may have a precious metals or gold mutual fund option. My wife's 403b plan had a gold mutual fund option until last fall when the trustee "enhanced" the plan and eliminated that option. Those with self-directed IRAs have a number of options.

Perhaps the best, safest, and easiest silver investing option for a self-directed IRA is an Electronic Traded Fund; an ETF. Silver ETFs are a relatively new silver investing vehicle. With an ETF, asset selection and management is much like a mutual fund, but it trades like a stock. That is, investors can buy and sell ETFs throughout the trading day, whereas mutual funds can be bought and sold only once each trading day. At this time there are only a handful of silver ETFs. But if you choose this method, you really only need one. Standard silver ETFs buy and hold silver. Therefore, the share value will track the change in the price of silver very closely. If you choose to invest through an ETF, I recommend you choose the one with the highest average volume of shares traded.

There is at least one super charged silver ETF. It attempts, on a daily basis, to a percentage change in share value that is 200% of the change in the price of silver. This ETF does not hold physical silver. Management utilizes options and other leveraged derivatives to achieve the 200% result. It's been a wild ride for leveraged silver investment vehicles--which brings us to stock options. Money management experts caution that leveraged ETFs can suffer slippage in sideways markets. That is, if the price of silver fluctuates within a range for several weeks and ends up at the same price, the share value of the leveraged ETF might actually be lower.

Stock options can be purchased on silver ETFs, just as they can on other common stocks. Because the price of silver is so volatile, options on silver equities carry a very high premium. I advise all but the very experienced to stay away from options with retirement money.

Then of course, there are silver mining companies. There are only about two dozen silver mines in the world. And these mines only produce about 25% to 30% of the annual silver production. Most silver is a by-product of another type of mine; most commonly zinc or copper. When buying silver stocks, or options on silver stocks, it is best to buy companies that have proven silver reserves, not exploration companies. Mining companies that have proven reserves benefit from a rising price of silver. And, such an investment provides leverage because production cost is fairly stable. For example, if the production cost of a particular mining company is $15 per troy ounce, and the price for which it can sell bulk silver is $25 per troy ounce, they make $10 per troy ounce produced. If the selling price increases to $35 per ounce, they make a $20 per ounce profit. A 40% increase in selling price results in a 100% increase in profit. Higher expected profits pushes share price higher.

I am not aware of any silver mutual funds. But if silver continues to outperform gold by such a wide margin, I wouldn't be surprised to see one soon.

Learn how to protect yourself against the current (and impending) economic disaster with silver investing. For more information:
http://www.esilverinvesting.com

Silver Price Pullback - Silver Investing Disaster Or Opportunity?

About a month ago I posted a response in another venue to an analysis of the silver market. The analysis was solely technical; that is, charts. My brief response was that any pullback would be shallow and short-lived. I have been surprised, and was forced to reconsider my view on silver investing.

I was surprised by the depth of the pullback, which was about 13%--so far. The January 28th price recovery of just over a dollar per ounce due to the protests in Egypt does not necessarily mean the end of the pullback. In my last post on Ezine Articles I wrote that I could not think of a black swan event that would be bad for silver investing. While Egyptians or others who live in that part of the world might not have been surprised by the rioting in Egypt, I certainly didn't see it coming. And I couldn't have accurately predicted the dollar increase in the price of silver. My view on silver is a long term view.

I expected any price pullback in silver to be limited to a maximum of about 8%. I expected the increased investor demand to stabilize price as investors rushed in to buy more at lower prices, which I did. While a 13% pullback wouldn't be considered a major pullback by most, and while 3-4 weeks is not a long term correction, the silver chart does look ugly.

While I believe charting can tell you when to buy and when to sell, and rely heavily on charts in my equity investing, in my silver investing I believe the fundamentals will overpower any and all charts. Precious metal and stock market analysts in the United States credit the price pullback in gold and silver to strength in the stock markets. They believe investors moved money from precious metals into the stock markets for better yields. The conspiracy theorists in the silver investing community claim the price of gold and silver are being manipulated.

I believe that if there is manipulation in the silver markets, it is short term manipulation designed to allow the banks that have massive short positions to cover their short positions at less of a loss. As to money moving from silver to the U.S. stock markets; silver is not a U.S. controlled commodity. On the other hand, there is so little physical silver in above ground, it would only take a tiny percentage of the money tied up in the U.S. markets to cause a short term price fluctuation.

Those with a long-term view of silver investing will take this opportunity to acquire physical silver. January was a record sales month for a California gold and silver dealer. Revenue from silver sales far exceeded that of gold sales. I am not suggesting that the volume of physical silver sales at a large leader will affect the world silver price. However, the cumulative buying activity during this price pullback will decrease the future supply of silver. And silver, unlike gold, has tremendous industrial application. A decrease in supply due to increased investor demand will drive price up, albeit irregularly. Industrial users must buy silver or go out of business. Since silver is a relatively small percentage of total cost in most industrial applications, they will pay any price, and at some point either hedge or hoard.

If enough of us in the silver investing community view price pullbacks as buying opportunities--and act--it will hasten the time when the shortage of physical silver, or the fear of the physical shortage of silver, will drive price through the roof.

Learn how to protect yourself against the current (and impending) economic disaster with silver investing. For more information: http://www.esilverinvesting.com