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Where can I buy silver?

October 8, 2012: 6:30 AM ET

How do I purchase silver in physical form or stock? — Pinikin D.

The easiest way to buy silver is to invest in certain exchange-traded funds such as iShares Silver Trust (SLV) and ETFS Silver Trust (SIVR). These funds track the price of silver on the open market, with each share typically backed by a specific amount of physical silver held in trust by the fund manager. Because they can be instantaneously bought and sold on the market, ETFs lend themselves to trading.

If you're looking to buy silver in physical form, traditionally that's done by buying bullion coins or bars. Many prefer the coins, such as the American Silver Eagle or the Canadian Silver Maple. These coins are issued by the U.S. and Canadian mints, respectively, and may be easier to sell than silver bars.

But Rich Checkan, chief operating officer of Asset Strategies International, a Rockville, Md.-based company that deals in precious metals, explains that the coins' extra liquidity comes at a cost. He notes that silver bars are typically marked up 5% over the spot price of silver, but the more tradable bullion coins are often marked up 16% or more because they are more expensive to fabricate. (Shares in silver ETFs can trade at a premium to, or discount from, the value of the metal backing them up; SLV, for example, recently traded at a premium of 0.13%. The ETF has an annual expense ratio of 0.5% of assets.)

Checkan recommends that to avoid buying bars with lower-than-advertised purity, you deal only with major mints approved by the London Bullion Market Association, a trade group that represents the wholesale gold and silver bullion market. A few such mints include Johnson Matthey, Engelhard and Sunshine. You can purchase bars from precious metals dealers such as Asset Strategies International (Checkan's firm), American Precious Metals Exchange, or Kitco.

Yet Checkan notes that there are drawbacks of owning physical silver. Many investors don't want to deal with the added costs and inconvenience of arranging secure storage for the bars or coins and insuring them. To help investors avoid those logistics, some financial institutions offer silver certificates of ownership which entitle the holder to a certain quantity of actual silver stored in a vault. One program worth considering: the Perth Mint Certificate Program (PCMP), the world's only government-guaranteed bullion storage program.

— Marc Mewshaw

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