Buying Silver Coins To Diversify And Prepare Your Portfolio

Silver coins have been around for many years, there are many popular silver coin variations to pick from, and they are increasingly valuable today. Use silver coins to further diversify your portfolio, hold physical assets, and even use them as part of a Prepping Plan.

This post covers what I’ve found success with, and offers a few suggestions for those looking to get involved with silver coins from a general exposure or ‘non-collector’ approach.

Investing in Silver Coins is a great way for beginners and seasoned investors to add extra diversity to their portfolio. Read on for insights about silver coin melt value, junk silver, and some pros and cons to owning silver!

WHAT ARE SILVER COINS? WHAT CAN THEY BE USED FOR?

The category of silver coins is broad, complex, and certainly interesting. This post focuses on the specific task of using them for some physical exposure to the precious metal, and for their role of use during an extreme contingency. With that said, let us begin!

Common Types of Silver Coins for Investing

As I said, there are many options for silver and for silver coins. That is one of the things I really enjoy about silver! There is a lot to consider and there are many viable investment options.

A few popular options for consideration are Silver American Eagles, Silver Canadian Maples, Morgan Dollars, Austrian Silver Philharmonics, Silver Krugerrands, and ‘Junk’ Silver (e.g. various Dollars, 1/2 Dollars, Quarters, Dimes, Nickels). However, these are just a few places to start!

Personally, I have found relatively successful ‘hunting’ with the Morgans, Maples, and Junk silver categories where I could buy in bulk quantities. Coinflation has a nice list of common US and Canadian circulated coins which could be considered some of the best for investing. Their list has a face value and approximate melt value listed (based on the current spot).

What is Silver Bullion?

For a more technical definition, Gainesville Coins says “silver bullion is silver which derives its value solely from its metal content.” I differentiate this from circulated coins (e.g. the Silver Morgan Dollar) which often contain a premium for historical and grading qualities. Bullion examples are the ‘bars’ in various weights and purity, but it can also be generic ‘rounds’ as well such as the Philharmonics. (I have also noticed that this definition varies slightly between various sites and exchanges).

What is Junk Silver?

One of my favorite categories, the APMEX says it well: junk silver is “is actually a misnomer,” it is not junk! As a matter of fact, “many of America’s coins circulating before 1965 were made of 90% Silver. They are now referred to as “junk Silver” because their value is solely based on their metal content instead of collectibility or condition.” 90% Silver US Silver coins include United States dimes, quarter, half-dollar, or dollar. Note, some US coins (e.g. nickels, Eisenhower dollars, Kennedy Half Dollars from 1965-70, etc.) contain lower percentages at 40%. 

You can buy this in bulk, often lowering the premium from the spot price of silver. I find this valuable for the goals of this post of holding a multi-use physical position in silver. Also, taking the US silver coins as an example, they retain their face value as well.

WHY BUY SILVER COINS? ARE SILVER COINS AND PRECIOUS METALS A GOOD INVESTMENT?

In my opinion, silver coins do belong in a portfolio and have a place in family finances. Even as a small percentage of the overall portfolio, these silver coins serve serval purposes.

They offer exposure to the precious metal itself, they’re fun to explore and hunt for, they provide a physical asset, and for extreme scenarios, they are useful for trading as well. I think it makes sense to prepare in some capacity for as much as you can. A small holdings position of silver seems to check the boxes satisfying those needs.

I would caution against emotional buying and encourage you to have a well-established budget, emergency fund, life insurance, and automated retirement well underway. I think it is best addressed in a small and steady trickle.

What to Consider before Investing in Silver: Pros and Cons

I’ve undoubtedly conveyed my opinions and ‘PROS’ thus far, and encourage everyone to apply what works best for their relative situation. To mitigate some risk, consider holding a relatively small percentage of your total portfolio in silver coins and storing them somewhere safe (such as a safe deposit box at a local bank, etc).

PROS For Investing in Silver Coins

In brief summary, PROS include the benefit of holding the assets physically in your possession, the exposure to the silver market for your portfolio, and the benefit of a fall back in an extreme scenario. I think owning the coins is also historically interesting, although there is perhaps less material value in that. For me, holding silver coins is a blend of diversity in the portfolio, contingency, and a hobby.

CONS for Investing in Silver Coins

I’ll include the opposite of several of these PROS. Not the least of which is the illiquid market of holding the coins in person. If you do need the cash (which would ideally be quite rare), the coins themselves need to be sold which is additional time and effort. Beyond that, the bid-ask spreads can move against you especially over the short-term. There is also the risk of holding the assets as well as the cost associated with securing them.

Silver Coin Melt Value

In the spirit of this post, make sure you understand what the silver melt value is, especially for coins and bullion where you are not investing for the numismatic value. Melt value is the “true silver” value of the coin. You can use this silver melt calculator as a starting point for estimating what the coin is worth in terms of silver value. Keep in mind, numismatic value adds a premium to that (for things like scarcity and grading)!

Quality and Scarcity/ Rarity (Numismatics)

Another important factor in identifying the premium of a particular silver coin is the numismatic value. According to coinvalues.com, numismatic value is “a premium paid for a coin due to its historical significance, rarity, condition, or other factors not directly related to bullion content.” For example, if a coin is particularly rare and in great condition, it will of course be more valuable relative to a peer coin of considerably worse value. Take a look at this grading scale for more information on how that rating system is defined.

HOW TO START INVESTING IN SILVER COINS FOR YOUR PORTFOLIO

Mêtis is about a solid comprehensive approach to Money Matters, and exposure to precious metals is absolutely part of that!  Even beginners can invest in Silver coins. Take it slow, and only invest what you can afford to lose. However, I don’t recommend ad hoc investments like silver until a proper budget, emergency fund, and retirement fund contributions, and life insurance is in place.

Different Ways to Invest in Silver

Investors have the option of exposure to silver in several ways including buying mining stocks, indexes, mutual funds, and the like. That said, this post is focusing on investing in silver coins, including bullion and junk silver (mentioned above). (The other options are certainly good and they are valuable in their own regard!). Start the hunt for your silver purchases by outlining what it will be used for. For example, I like to buy a variety of US and Canadian silver coins of relatively low grading value so that I can get as close to the spot price as possible. For the same reasons, I also like to buy “junk” silver which has already been issued and circulated.

How to Buy and Invest in Silver Coins

Ok, so you’re thinking about investing in your own silver coins! Congrats, and happy hunting. Let’s talk about a few places to buy silver coins, and a couple of rules of thumb to keep a healthy balance in your overall portfolio. Keep in mind there are bid and ask prices for silver, and the midpoint is what I try to aim for as a factor for determining a good price point. However, if the silver coin market is one driven primarily by selling/ buying you can expect to pay more or less respectively (ie wider or tighter spreads).

Where to buy Silver Coins? Best Place to Buy.

I advise caution when purchasing silver (or any investment for that matter) and encourage a healthy review of the merchant you are dealing with. Also, make sure you understand what you are buying and be suspicious of “amazing deals” that are too good to pass up. Know your product, and know your price range going into the transaction.

Buying Silver Coins on eBay

I have found a few solid and well-reviewed places to buy on eBay. As I mentioned, make sure and do your homework before buying from an individual. I have found success in buying through companies that list on eBay vs. the individual seller. (If you are very confident in your ability to spot a deal, then, by all means, go for it). Another careful consideration is the shipping (secure, tracking, etc.) and returns policy.

Buying Silver Coins on JM Bullion, APMEX, or other such exchange

These are some of the heavy-hitters, and they generally offer discounts for bulk purchases. Generally speaking, you can buy from them with a higher degree of confidence. However, you may end up paying a slightly higher premium for the benefit. I have used some of these companies and have been satisfied with the quality of the product and the secure shipping.

Buying Silver from a local dealer

I have a favorite local dealer I like to use, but sometimes it is simply not realistic. Especially during something like COVID where social policies can be more restrictive, it can be more difficult to buy in-person. Still, I recommend checking in with your local coin dealer if this is something you have access to. They offer expertise, advice, and a way to sell should you need to do so. Build the relationship!

What is a good Price?

We’ve talked about melt value, and we’ve talked about numismatic value. For the specific task of getting silver in your possession (vs hunting for or building a unique silver coin collection), I always start with melt value. Melt value is linked to the spot price of silver and it will move up or down depending on the overall market conditions. From there I generally factor-in about 5-8% premium for junk silver, and perhaps a little higher for silver coins like the Canadian maples on the secondary market. This is not a perfect science, but I would be very careful about spending an obscene premium.

Timing is very important!

Be patient, and avoid buying during times of increased demand as prices will go up. Also, the premium can sometimes be ridiculous due to those market conditions. Buy when you can, and buy intelligently. Don’t buy in an emotional state. Know what the coins are approximately worth and stick to your guns. This is especially important when bidding on silver coins (e.g. eBay) where the rush from bidding can cause you to make poor economic choices.

In times of uncertainty, fear, or other stimulants the premium can grow as people are willing to pay more for their silver coins. This is all fine and dandy, but remember should you need to sell that high premium cost could now factor in against your return.

Mêtis in our Silver Coin Matters

I really enjoy the silver coins in our holdings. Many investments are relatively intangible in the immediate physical sense, and it is fun to hold a piece of history as well. Silver coins make great multi-use investments.

Remember, when the demand spikes the sellers are happy to meet the growing demand with higher prices. Try to be intentional about timing your investment.

How Much Silver should I own?

This is largely up to your family situation, and it will vary depending on the need and amount of your budget dedicated to silver investments, etc. With that said, I recommend 2-3% of the total portfolio value be dedicated to precious metals. For me, I have chosen to hold a small margin in physical silver (i.e. silver coins) and grow it as the opportunity presents itself over time.

I hope you enjoyed the post and that it provides you with a few ideas on how silver coins could benefit your family’s financial situation. Best of luck to you and yours! And remember, cultivate Mêtis in your Money Matters, and diligently pursue financial excellence!