Is silver a good investment? Only if you target silver ETFs or silver mining stocks, and follow these mining investing tips.

Is silver a good investment? Conservative investors should limit their total silver investments, as they would with any volatile commodity investment, including gold. Further, silver should only make up a small portion of the resources segment of your portfolio.

When you invest in any resource stock, silver miners included, you need to look at how long the company’s reserves are likely to last. Those with low reserves need to have consistent success in their exploration programs to maximize the production of the mine and the surrounding area. That success is far from guaranteed.

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Is silver a good investment if you’re buying bullion?

We recommend staying away from silver bullion, certificates representing an interest in bullion, and other silver bullion alternatives such as so-called “junk silver” coins (these are common coins with no numismatic value and that trade strictly on their silver content). That’s because these investments have hidden costs that dramatically cut their value over time. For instance, silver bullion and coins require insurance and storage, which will be a continual drain on your cash.

Is silver a good investment? It can be if you make these type of silver investments

If you want to invest in silver, we think the best way to do it is through silver mining stocks or ETFs that hold those stocks.

Additionally, silver mining stocks tend to follow silver prices closely.

Is silver a good investment? Follow these five steps to make better decisions

• High-quality silver mining stocks should have strong balance sheets with low debt. Junior mines should have a major partner who can finance a mine to production.
• Be careful when investing in a new issue of a silver mining stock. If they lack sound operating history, or a strong management team with a record of success, you may be wasting your money.
• To profit from silver mining stocks, look for well-financed companies with no immediate need to sell shares at low prices, since that would dilute the interest of existing investors.
• We always look at the market cap of silver mining stocks versus the estimated value of the mineral resource they have in the ground. Sometimes, a company’s marketing efforts are so successful that they drive the stock up too high in relation to the size of its ore body. We like a silver mining stock’s market cap to be no more than half the value of the silver. We assume that the company will be able to expand its ore reserves after the mine opens, but if the mineral reserves are double the silver mining stock’s market cap, that provides a margin of safety.
• We also recommend avoiding stocks that are trading at unsustainably high prices as a result of broker hype or investor mania.

How to successfully invest in precious metals like silver

Silver attracts a lot of interest as gold prices reach levels that seem too expensive for the average investor. Silver is sometimes known as the “poor man’s gold” because of this.

We continue to recommend that you cut your risk in the volatile resource sector by investing mainly in stocks of profitable, well-established mining companies with high-quality reserves. And as mentioned, resource stocks (and this includes oil and gas, of course) should make up only a limited portion of your portfolio—say less than 20% for a conservative investor or perhaps as much as 30% for an aggressive investor.

While we think you should maintain some exposure to resource stocks, you should still aim to spread your portfolio holdings across most, if not all, of our five main economic sectors: Resources & Commodities, Finance, Manufacturing & Industry, Utilities and the Consumer sector. You should always resist the temptation to load up on mining stocks, no matter how attractive they appear. If the market does go into a downturn, these stocks could suffer more than average.

Silver is used in many products found in the industrial, energy, and telecommunication industries. Does this make silver a better investment in your eyes, and do you prefer silver over other mining stocks?

Silver has emotional appeal, as well as industrial importance, but silver stocks can be volatile. Have you had success investing in silver? What do you feel contributed to that success?