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    Tips for when investing in silver

    By boundlessinvest | October 17, 2014

    bullionInvesting in silver is quite possibly the most underrated form of investment. For one, when something breaks in the news that could potentially affect the market, investors turn to gold. Little do most people know that gold isn’t the only metal that can be used as a form of wealth in case the market goes sour. Silver, in fact, is known as the “common man’s gold” that can also be used as legal tender when fiat currency fails. In addition, it is a metal that will always have a market, particularly due to its uses other than acting as an alternative currency. Silver is also used in the construction of buildings, concoction of medicine, and manufacturing of electrical appliances.

    However, despite it being more affordable than its precious yellow metal cousin, silver investing has its ups and downs. Here are three things that you should keep in mind when investing in the highly-volatile precious metals market.

    Treat leverage with caution

    Leverage is when you try to multiply your gains by buying more assets using borrowed funds. In the precious metals market, you may leverage anywhere between 2:1 or 25:1. While leverage may sound like a dream, it actually always isn’t.

    You see, while leverage can help your returns skyrocket, it can also hurt you a lot when silver’s prices decline. Remember, the precious metals market is a highly volatile one. For example, imagine buying a silver bar and then leveraging four more with margin. If silver’s prices went in your favor, then there wouldn’t be any problem. But what if silver’s price per ounce suddenly declines from $20 an ounce to $14? Because of the four leveraged bars that you own are down, you’ll be forced to take one of your bars at a loss.

    Remember, use only small amounts of leverage. Doing so will allow you to enjoy the strength that leverage can give, and also easily manage the losses that come with it.

    Choose bars over coins if you can

    If you decide to buy good delivery bars or coins, you don’t only pay for their actual market price; you also have to pay for their premiums. One bar usually weighs 1,000 ounces, but, according to investment site BullionVault, the standard dealing amount is usually 1 ton. This is the reason why a lot of investors choose to buy coins. However, compared to the silver bars, these smaller units have a higher mark-up. So if you can afford it, go for bars instead of coins.

    Patience, patience, patience

    Precious metals aren’t investments that yield high interest rates. Therefore, you have to be patient when you pursue silver investing. Sometimes, silver’s prices don’t increase for weeks, or even months from the moment you made your purchase.

    Don’t panic, though. Silver prices, as well as gold, are driven by the things that happen in the world. If inflation breaks out, silver’s prices would dramatically increase. If word gets out that a technological breakthrough involving the use of silver has been made, silver’s prices will skyrocket. When industrial demand for silver increases, the precious white metal’s prices will also move up. The key is keeping yourself in the loop with the news in order to know when to sell.

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