How to Buy Bullion Bars for Investment in Silver

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18Karat submitted this on January 11, 2010

Most articles and commentary focus on silver coins as bullion; this will shift the focus to silver bullion bars. A bullion bar is just that a bar of silver. The main benefit of bars remains the compact storage and larger quantities of silver per bar.

Traditionally, bullion bars came in 100 oz. sizes; however, now companies have innovated to include even 1 oz silver bullion bars. So, going on: here’s how to invest in silver using bullion bars.

The first step is determining your silver investing budget: how much silver can you afford to buy. This will then determine the amount (in ounces) you should buy. Studies from Ibbotson Associates shows between 8 – 10% of your total investment portfolio should be invested in silver. However, if you think above average inflation is on the way then a higher percentage may be warranted.

Anyways, after figuring out the ideal budget for your personal investing needs, selecting the size of the bullion bar is next. This step is a little more tricky than the last. Take the total amount you’ve budgeted ($1,000 for example) and divided it by the current price of silver ($18.44 for example). This will equal the amount of silver you can buy in terms of ounces (54.22 ounces of silver for this example). Now, just as you wouldn’t want just one stock, you won’t want one large bar of silver. It’s important to spread out the ounces you can buy into multiple bars because of the liquidity risk. Say one day you need to liquidate some silver–it will be much easier with multiple (smaller sized) bars.

Now, once you’ve decided the ounce allocation, the third step is deciding the company(ies) that you’ll buy these silver bars from. Several companies like A-Mark, Sunshine Minting Co., and Engelhard all make various silver bullion bars. Now, back to this spreading out risk idea as we talked about in #2, it’s important to remember that buying silver bars from one single company would be more risky than spreading your silver allocation out to all three (or more). That way, should investors favor waver from one bullion bar to another, you’ll be set holding multiple types of bullion bars.