Silver is not usually the first allocation priority in most people’s portfolios. It does nonetheless have an important role to play when it’s allocated in the right amount that can both enhance returns and reduce risk.
This metal isn’t often chosen as a first allocation priority in an investment portfolio. Most metal traders consider gold a more popular option. Large financial institutions purchase gold as currency hedge to protect themselves from unexpected drops in currency exchange rates. Central banks use gold as a reserve asset for currency exposure diversification. To put it simply, they use gold as a safety net. Silver, on the other hand, has been traditionally used as a commodity than a monetary asset.
So why trade silver?
Shane Perry of Max Funding says,” Silver has seen significant momentum in the last two months as it is now outperforming gold. One mining executive said that all-time highs are not out of reach for the precious metal with this strong tailwind”
1. It Has Unique Monetary Properties
It’s no coincidence that ancient civilizations also regard silver as a currency.
Cognoscibility. Silver is always classified as a metal of high value, making it a medium of exchange in numerous places across the world.
Divisibility. Even if you break down silver into smaller units, it can still be used for purchase products or services, unlike other barter items.
Fungibility. The smaller units of this metal are interchangeable.
Durability. Being corrosion resistant, silver can stay in circulation for a long time.
2.It is a “Safe Haven” for Investors.
Silver has been traditionally classified as “safe haven”. This term refers to asset classes that tend to hold their value amid market turbulence. Other examples include government bonds and reserve currencies.
Safe-haven assets add diversity to investment portfolios. By mixing silver in your assets, your portfolio’s overall risk is neutralized. Of course, this is only possible if the individual performances of your assets are not equal.
3.It Provides Remarkable Stability
Speaking of safe-haven investments, market experts believe that it’s time to start protecting their investments with a hedge.
The world economy is now transitioning from an 11-year long bull market to uncharted territory. As this period comes to a close, many investors are taking high stakes while the returns are dwindling. Moreover, the extreme policies implemented after the 2008 financial crisis for economic stimulus have an almost unpredictable nature.
All of these support silver’s position as an “inflation hedge”, and should convince you to get into silver trading.
4.Offers Long-term Wealth Preservation
When you analyse all the aforementioned reasons for trading silver, you’d resolve that silver can preserve purchasing power. The appeal of this metal, over the long run, becomes less of a speculative endeavour and more a stable investment.
Another appealing trait of this commodity is its high liquidity, which means it can be sold fast and easy without dramatic price decline. This especially helpful in case emergencies or major market disruptions.
No amount of analyses can exactly predict the future. But if you’re a conservative investor, silver is a low-risk alternative. The performance of this metal in the market recently should also be studied by those who are in hot pursuit for enormous returns.
Krishna Murthy is the senior publisher at Finance XOD. He is not only the senior publisher but also the owner of Tricky Finance. Krishna Murthy was one of the brilliant students during his college days. He completed his education in MBA (Master of Business Administration), and he is currently managing the all workload for sharing the best banking information over the internet. The main purpose of starting Tricky Finance is to provide all the precious information related to businesses and the banks to his readers.