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What are Silver Stocks?

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  • Written By: Ben Taylor
  • Edited By: A. Joseph
  • Last Modified Date: 29 August 2016
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Silver stocks are shares of public companies that mine and market silver or that otherwise are exposed to the silver market. To invest in silver or other precious metals rather than a company, one should buy silver commodities or futures instead of silver stocks. Silver's supply and demand, which controls price, and the silver market itself, however, will affect the return on any investment, no matter in whether it is in stock, stock options, futures or commodities.

Silver companies that trade on a stock exchange can sell common stock to everyday investors. These companies can trade their stock on several different stock exchanges in various countries. Silver stocks aren't always the most economical way to invest in the silver market. Buying options on a silver stock can enable the investor to buy into the silver market at a better price. Stock options allow the investor to buy stock at a better-than-market price, so buying options on a silver stock makes it possible to occasionally buy silver stocks at a price that beats the market.

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Buying silver as a commodity differs from buying silver stocks in that commodities allow the investor to actually own silver instead of shares of a company. Silver as a commodity is traded on several exchanges around the world, including the Chicago Mercantile Exchange, the Brazilian Mercantile and Futures Exchange and the London Metal Exchange. Futures contracts, which are also traded on mercantile exchanges, represent an agreement for an investor to buy something for a set price that a seller is yet to produce. So, silver futures allow people looking to buy into the silver market to lock in a price for silver that is better than the market value. If an investor feels bullish about silver prices, buying a futures contract will yield both a better profit and a quicker return.

Silver can be a speculative investment, but it doesn't have to be. Historically, silver commodities are cheaper than other precious metals while showing competitive percentage growth; silver stocks also keep pace with their more expensive counterparts. Options and future contracts are a bit riskier because their value is more reliant upon market whims than is a conventional silver stock or commodity, but silver stocks do enhance an investment portfolio by providing more security than common stock of other companies.

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