How to Buy Silver Stock

Buying the stock of silver miners can be accomplished via just about any reputable stockbroker, although some brokers might suit your needs better than others. Since more than half of all mining companies are listed on Canadian exchanges, choosing a broker that provides access to Canadian stocks gives you the most silver stock investment options. 

The exchange with the most listings of silver mining companies is the Toronto Stock Exchange (TSE) that incorporates the TSX Venture Exchange (TSXV). The TSXV specializes in emerging companies, so newer Canadian silver miners that have recently gone public are generally listed on this exchange. 

Many of the larger Canadian mining companies also dually list their stock on the New York Stock Exchange (NYSE), the American Stock Exchange (AMEX) or the Over the Counter market (OTC). You can execute trades in these stocks through a regular stock broker that handles US stocks. 

If you decide to invest in smaller mining companies listed exclusively on Canadian exchanges, then you would probably be better off with an international broker or a Canadian broker that can execute trades on the TSX. 

You may also be able to purchase a larger quantity of stock directly on the TSX, although you will incur exchange rate risk if you do not live in Canada since TSX listed stocks are priced in Canadian dollars. 

Before you can begin buying silver stocks, you’ll have to open a brokerage account with a reputable stock broker. Opening an account with a broker is easy, and some brokers will even let you open an account without a deposit. 

If you want to buy stocks, then you’ll need to fund your account with enough money to cover your intended purchase. You can calculate the amount of money you’ll need by multiplying the price of the stock by how many shares you wish to buy. You can also divide your intended investment amount by a stock’s share price to get the number of shares you can afford. 

You may also be able to open a margin account and leverage the money in the account to control even more silver stock with the same amount of money. Be aware that if the stock you buy drops by a significant amount, you will generally get a “margin call” from your broker that obligates you to either liquidate the position or deposit additional funds.   

After you’ve opened your stock brokerage account, you can begin researching the silver stocks you would be interested in buying. Silver mining stocks should be evaluated much like other stocks, with the added component of their correlation to the silver market.

Ideally, you would look for companies with a strong financial statement, positive cash flow and a healthy return on assets and equity. Also, a mining company with a 2:1 ratio of assets to liabilities, a good forecast on production and proven reserves would seem a prudent investment.  

The mining companies you select should also not be subject to environmental litigation, labor strikes or  political uncertainty that could threaten their silver production. If you do your research carefully, you should come up with some decent silver mining stocks to add to your portfolio. 

After researching and selecting the silver stocks you wish to buy, you are now ready to place an order with your broker to buy the stocks you’ve singled out. If you hold a position in a margin account, you will need to make an initial margin deposit. 

You are then required by law to maintain at least 25% of the total value of your stock in the margin account at all times, many stockbrokers require a higher maintenance margin of 30% to 40% of the value of your stock. This is called the maintenance requirement. 

For example, if you bought your stocks in a margin account with a stockbroker that permits 2:1 leverage, then you initially have to pay 50% of the price of the stock and borrow the other 50% from your broker. If the market declines, then you may receive a margin call requiring you to add maintenance margin funds to your account or liquidate the position. 

Trading your silver stock is entirely optional if you plan on investing for the long term, although it could make sense if you want to maximize returns by taking additional risk. Trading costs are minimal since many major brokerages now offer commission-free stock trades, so your success mainly results from whether you choose winning or losing trades. 

Remember that if you buy and sell the same security in a margin account on the same day, you have just made a day trade. If you make four or more day trades in a margin account within five days, then you would be considered a pattern day trader and might have to meet certain requirements to continue to operate in that way. 

For example, the U.S. Securities and Exchange Commission (SEC) has strict rules for pattern day traders that include maintaining a minimum balance of $25,000 in the account at all times. If your account falls below the $25,000 requirement, you will be issued a day trading margin call and not be permitted to trade until you have funded your account to the $25,000 minimum.