Silver stacking is a unique investing strategy that has gained a lot of momentum over the past few years. Although investing in silver is nothing new, there’s been a renewed interest in piling up as much silver as possible.
This guide will explore the ins and outs of silver stacking, whether or not it’s worthwhile investment strategy.
Silver Stacking
Silver stacking is an investment strategy focusing on the accumulation of tangible silver assets such as bars, bullion, or coins. The term stacking has a double meaning – it refers to the process of collecting silver and the action of physically organizing silver assets. Although silver stacking can incorporate investment-grade products, it tends to focus on silver bullion. The primary goal of silver stacking is to steadily increase an investor’s physical silver holdings for an increasing hedge against inflation and other economic pressures.
6 Reasons People Stack Silver
1. Low Barrier of Entry
Silver stacking is generally more popular than gold stacking because of the lower barrier of entry. Historically, silver has always been significantly more affordable than gold. This is primarily due to the abundance of silver which dwarfs the gold supply. The relatively low spot price of silver makes it easier for investors to purchase large quantities.
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Get Your Free Report2. Hedge Against Inflation
One of the primary motivations behind stacking silver is protection against economic uncertainty. Silver has a proven track record as a good hedge against inflation. Unlike stocks, bonds, and other paper-backed assets, physical silver holds inherent value. Furthermore, silver’s performance is negatively correlated with traditional markets. In other words, when the stock market goes down, silver prices tend to rise.
“If inflation increases, the…purchasing power of our dollar is going down. Gold and silver are going to be the best place to have your money.”– Precious Metals Advisor Todd Graf
3. Physical Asset
Silver stacking attracts many investors looking for a tangible alternative to paper assets such as stocks, ETFs, and mutual funds. As a physical asset, silver offers greater control and security than dollar-backed assets. Although there are paper silver assets, they only offer indirect exposure to silver because of their reliance on traditional markets. Silver stackers focus on inherent value through ownership of physical silver.
4. Popularity
Some people stack silver simply because it’s popular. Although investing in silver dates back millennia, silver stacking is a relatively new trend. It received a major boost in popularity following the GameStop fiasco when retail investors banned together to take on institutional shorts. The momentum of silver stacking actually helped raise awareness of the importance of physical assets among the average investor.
5. Demand
Widespread demand is one of the biggest factors influencing the value of silver. This metal’s unique ability to efficiently conduct electricity and heat makes it a popular choice for a wide range of industrial applications. On top of that, silver’s aesthetic appeal is a staple of the jewelry industry. These diverse use cases translate to massive demand for silver which makes it a popular choice for silver stackers looking to park their wealth in a valuable asset.
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6. Simplified Strategy
The simplicity of silver stacking is attractive to many people. After asset allocation percentages are established, investors can simply dollar cost average into silver and gradually build their stockpile over time. This straightforward and user-friendly approach contrasts with other investment strategies that involve more nuance and require more strategizing. Many investors view it as a method for effectively safeguarding their wealth without requiring financial expertise.
“If you’re a bullion investor, you have the ability to adjust the average cost of your holdings over time because of the volatility of the market. You can take advantage of the ups and the downs and the swings as long as you understand you’re along for the ride.”– Precious Metals Advisor John Karow
6 Considerations of Silver Stacking
Silver stacking is growing in popularity, but not everything about this investment strategy is shiny. There are some potential challenges to consider before adopting this approach:
Storage Space
The need for storage space is an unavoidable problem of silver stacking. Physical silver’s relatively affordable price means investors can accumulate it quickly. Storing considerable quantities of silver in any form can be a practical and fiscal challenge.
Security
Security is another major risk factor for silver stackers who take full ownership of their holdings. While buying investment insurance is possible, these costs eat into investment appreciation. It’s often necessary for silver stackers to purchase safes or use storage facilities to properly house their ever-increasing silver allocation.
Transportability
The sheer weight and size of a portfolio focused on silver stacking also raises the issue of transportation. Whether you need to move or liquidate your holdings, getting a sizable amount of physical silver from one place to another can be time-consuming, risky, and expensive.
Diversification
Stacking silver increases a portfolio’s security and stability, but it does focus on a single physical asset. A split between silver and other physical assets, like gold, could provide more diversification for a portfolio. Investors could also consider a range of precious metals when building out a robust and sound portfolio.
Taxes
Silver stacking exposes investors to a hefty capital gains tax when liquidating their silver assets. The IRS can take up to 20% of the investment’s value even if it’s held for a long period of time. You can bypass this tax by investing in silver through a precious metals IRA. This self-directed IRA allows investors to purchase physical assets with tax-advantaged dollars.
Volatility
When compared to the performance of gold, silver prices can be relatively volatile. This size of the market makes it more susceptible to quick upswings and downturns. Investors looking for more stability and predictability might want to consider adding gold to their portfolios rather than sticking exclusively to a silver-stacking approach.
The Do’s & Don’ts of Silver Stacking
Do stick to your budget.
As with any investment strategy, silver stacking shouldn’t strain your budget or push the limits of your asset allocation goals. Calculate an amount that makes sense based on your income, assets and your overall investment approach.
Do invest gradually
It’s impossible to accurately time the inevitable ups and downs of the silver market. By investing a set amount of money over time, you can smooth out these price jumps for a lower cost basis. In the end, that makes for a higher return.
Do stick to reputable vendors.
It’s imperative to stick with reputable precious metals dealers when silver stacking. An experienced and trustworthy supplier ensures the assets you’re purchasing are authentic. They should also be able to help you determine the best silver products for you.
Don’t go all-in on silver.
Some investors take silver stacking to the extreme by focusing all of their investments on this single precious metal. This mistake negates one of the chief aims of precious metals investing which is diversification.
Don’t invest based on a trend.
It’s never a good idea to adopt an investment strategy just because it’s popular. That’s not to say all popular investment strategies are bad. However, you should always explore the advantages and downsides of any approach before implementing it to make sure it aligns with your investment goals.
Is stacking silver a good idea?
The efficacy of silver stacking depends on your unique circumstances including time horizon, budget limitations, and investment goals. Investing in physical silver is a great way to diversify your portfolio for enhanced protection against inflation and other economic pressures. However, a precious metals investment strategy focused solely on stacking silver has some inherent disadvantages.
Wondering if silver stacking is a good choice for you? The Precious Metals Advisors at SBC Gold would be more than happy to discuss the best investment approach given your unique situation. Please contact us by calling toll-free at 1-888-812-9892 or by using our live chat function.