Silver often plays second fiddle to gold when it comes to precious metals. That makes some sense since silver is a much cheaper metal -- its price is just not as captivating. However, like gold, it is considered a store of wealth and has historically been used as a form of currency. So, if you're looking for a precious metal, don't overlook silver stocks and investments. That said, it's pretty easy to find a gold-focused stock, but a lot harder to find one that is focused on silver. Here are a few of the best options for adding silver to your portfolio, including my top pick, Wheaton Precious Metals (NYSE: WPM).
Some background
Silver is unique from gold in that roughly half of demand stems from industrial purposes, like electronics, photography, and photovoltaics. The rest of silver demand comes from jewelry, bullion, and silverware. Demand for bullion and jewelry is far more reliant on the vagaries of consumer and investor sentiment than industrial demand. That gives silver a stronger demand base then gold, where jewelry, bullion, and central banks account for around 90% of demand.
Wheaton's portfolio of investments. Image source: Wheaton Precious Metals.
Another reason to like Wheaton over a miner like First Majestic is diversification. First Majestic has six mines and two mine projects in its portfolio. Wheaton Precious Metals has investments in 20 operating mines and eight development projects. In fact, it's probably more appropriate to think of it as a specialty finance company, with a portfolio of mining investments, that gets paid in silver and gold.
There is one drawback: Silver is expected to account for around 55% of its production over the next few years. That means you'll get less exposure to silver than you would via an investment in First Majestic. However, I believe the benefits of Wheaton's business model outweigh this issue and make it the best option for investors seeking exposure to silver.
Plenty of ways to go
In the end, there are plenty of ways to get exposure to silver. You can buy coins, silver-linked ETFs, silver miners, ETFs that track silver miners, or a streaming company like Wheaton Precious Metals. You have to pick the option that's right for you, but I think Wheaton is the best of the bunch. Its diversification, high margins in good years and bad, and ability to use commodity downturns to grow its business set it apart in important ways. If you want to own a silver stock, I suggest you do a deep dive on Wheaton Precious Metals today.
More From The Motley Fool
Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.