Towards a Diverse Silver Portfolio

When buying your first precious metals, it can be confusing as to which coins and/or bars you should purchase. The following piece is intended to function as a very general guideline for the silver vigilante when it comes to buying silver, gold, platinum and palladium. First of all, let’s distinguish between types of products. I will focus on silver, but similar applies to the three other precious metals.

There are generally two types of silver products the silver-investor can buy: privately minted and public.

The privately minted products range from 1 oz bars and rounds to 10 oz, 100 oz and 1000 ounce bars. The advantage of the private products is typically their low premium. This does not apply with Johnson Matthey and Engelhard products, for example, which come with higher premiums. But, these higher premiums are not such a big deal considering how well-recognized their products are.

The other type of product is minted by national governments. These are oft recognized by the precious metals community more readily than is the private product, but not by much. Many people feel more comfortable buying nationally minted products, trusting the governments more than private companies.

Nationally minted products are key to a healthy silver portfolio based on the fact that when one’s life is internationalized through investments, relationships and businesses, they have more options should something go awry in their home country. Buying the right sort of silver can help this process, which is why I suggest buying the coins of each nation where silver is minted. The obvious ones are the U.S., Australia, Austria, Canada and Mexico. Unless you have ties to China or speak Chinese, my opinion is the Chinese coins are a bit expensive, especially in silver.

When analyzing what sort of products to buy, the first concern for the precious metals investor should be that it is stamped .999,.9999 or fine silver and that it have a weight on it signifying how much the product weights. An exception to this rule is junk silver, which does not say silver on it anywhere.

Beyond that, my advice is to diversify. Why? Because you just never know. I am sure that Krugerrand investors were shock and dismayed when they learned of the under-spec 2011 Krand proof and wished they had diversified with other gold products.

Some say buy only coins that are exempt from 1099b, but my feeling is there will be taxes on gold, silver, platinum and palladium no matter the form, and so this is not the best buying philosophy.

A balanced silver portfolio would encompass varying styles of 1 oz rounds, 10 ounce bars and Siver Eagles from multiple years and not just one year in particular.  Also, purchasing Libertads, Silver Maple Leafs and Philharmonics are an added layer of defense.

How much of each product you buy depends on various factors. Don’t have much cash? Then be sure to stick as much as you see fit with the cheaper private products, unless you absolutely prefer nationally minted products. The private products will save you a little extra cash you can spend at the bar after you visit your local coin shop.

Looking to internationalize with silver coins from the national government of another country? Well, then, ask yourself: which country?

If you are in closer proximity with Canada, go heavy on the Silver Maple Leafs if you want to internationalize. If you are in closer proximity with Mexico, then go heavy on the Libertad. Either way, make sure you are still diversifying and not buying only one type of coin.

Interestingly, many people like to stay away from the Mexican Libertad because of the propaganda by mainstream U.S. media against Mexico. But, the Libertad is a beautiful coins, and Bob Chapman and many other analysts such as Jeff Berwick have suggested Mexico as an excellent place to reside and/or expatriate.

There are various aspects which ought to inform the silver vigilante of which coins to focus on. These are:

Geography (so as to internationalize), premium dollar cost average (the average amount paid over spot silver), store-ability of products as well as bartering convenience. Be sure to buy plenty of junk silver in case you need to barter or get out of dodge quick. Also, do not get so attached to your silver that you will not switch to another precious metal, like platinum and gold, when the time is right.

Just as when you diversify between the precious metals, it is important to diversify with a broad range of products. One thing to steer away from are exorbitant premiums. There is not much reason to pay more than $3.50 over spot for any silver product at the current juncture,  and even then is $3.50 perhaps a bit much.

Happy Stackin’!