Facebook Twitter Pinterest RSS

Should You Invest In Silver As Well As Gold?

Most often than not, investors spend time trying to decide what type of bullion will offer them best return on investments. Most investors are indecisive about whether to buy gold or silver or both. One of the important things to understand is that both silver and gold have their salient aspects and drawback. To Buy Gold bullion is more expensive than silver but also offers strong protection or insurance against economic slowdowns and market busts. To buy Gold bars is preferred during uncertain economic period because silver is considered to be a rather speculative investment. This is in spite of the fact that both silver and gold are precious metals.

Even though investment in silver bullion can attract an initial VAT, it is still considered as an investment that can return substantial profits. If you are looking for a smart investment option then it is recommended to buy gold and silver as they can together offer higher benefit in the long term.

Is silver bullion a speculative investment?

Silver is categorised as a speculative investment because it does not offer the same return on investment or value for money as gold does. Hence the level of insurance protection or security offered by silver bullion is lesser than if you buy gold bullion. There is a high level of volatility in the price of silver although this volatility is not consistent throughout and hence is termed as speculative investment. The best time to invest in silver bullion is when the price of silver is stable and consistent.

If you go back in history, you will know that investment in silver is always a riskier proposition as compared to gold. In spite of the drawbacks that silver has, it is still considered as a good investment option second only to gold. During a four year period from December 2008 to December 2011, the price of silver has risen by 233%. It has actually outperformed any other type of investment including real estate, stocks, and gold by a substantial margin.

According to investment specialist Ian Williams of Charteris Treasury, the value of Silver is expected to increase by almost five times in the next three years and will reach a high by October 2015.

Is there VAT on silver?

One of the biggest drawbacks of buying silver is that it is not exempt from VAT in the UK unlike when you buy Gold bars. Silver coins and bars are charged a VAT of 20% flat. Any physical delivery of silver will attract VAT.

The value added tax (VAT) is one of the primary reasons why investors turn towards gold bullion investment but this doesn’t imply that silver is not a good investment. The important thing is to ensure that your investment in silver is for a long-term. Once you buy silver, you need to hold it for at least a period of one yegar before you plan to sell it.

Although it is often recommended to keep silver for several years but recent market turning events have hinted at the fact that keeping silver bullion for a year will help investors recover the 20 percent VAT paid on it. Let’s look at an example. If you have invested £5,000 in silver bullion in 2012 then the total investment will be £6,000 including 20% VAT. Now if you keep your silver bullion for a period of 3 or 4 years then it would be worth around £18,000. If you take out the VAT and the investment amount then your profit will be £12,000.

One of the important things to note here is that if have VAT registration then you will be able to purchase silver bullion and reclaim your VAT. In such a scenario, you will also have to recharge VAT when you sell thus neutralising the VAT element. You should confirm the VAT details through your accountant or from the office of HM Revenue and Customs.

Are Silver coins better than Silver bars?

It is never easy to decide which is a better investment – the silver bar or the silver coins? The silver bars are available from 100g to 5kg. If you are a first time investor then it is better to opt for the 100g silver bars that cost approximately £100. New investors can also invest in 250g bars at a cost of £230 or 500g silver bars costing around £400. If you are a professional investor with large capital then you can invest in 1kg and 5kg silver bars that cost around £800 and £4000 respectively.

On the other hand, silver coins are lighter in weight but need to be bought in volume in order to derive higher profit. The most popular silver coins is Silver Britannia, which costs around £30. The weight of the Silver Britannia coin is 1 ounce and it is available for different years. The cost of these silver coins varies according to the year of the manufacture. A Silver Britannia coin manufactured in 2012 will cost £28 while a coin manufactured in 2011 will cost £35. The older the coin is, the costlier it will be!

The silver bar is normally recommended over silver coins because of the sheer weight and advantage of liquidity. For example, 100g silver costs £100 and 100g is equivalent to 3.52 ounces, which translates to 3 or 4 Silver Britannia coins valued at £84 or £112. The cost is nearly the same but three or four silver coins is not a representation of good investment as opposed to a single 100g bar. You need to invest in a minimum of 25-50 coins to get a good return on investment.

On the other hand, if you plan out your investment strategy and buy both silver bars and coins then it will definitely be a great investment. When required you can sell of your silver bar and keep the silver coins for a longer duration of time. Your bullion portfolio also becomes diversified when you buy silver bars and coins apart from gold coins because price of silver is expected to rise steadily over the next five years.