US Treasury Bond, Silver, Gold or What?
December 29, 2011 12:56 PM Subscribe
I just became an uncle (Yay!) and I want to get my nephew a gift to help him start saving. My first inclination was to get him a US Treasury Bond, but I was wondering: Is buying an equivalent amount in gold or silver a better long term (30 plus years) investment?
You might look into a 529 account for saving for college.
posted by JXBeach at 1:13 PM on December 29, 2011 [2 favorites]
posted by JXBeach at 1:13 PM on December 29, 2011 [2 favorites]
My first inclination was to get him a US Treasury Bond
Do you mean a paper Savings Bond? If so as of next week those will be phased out. Everything is online now at TreasuryDirect.
Is buying an equivalent amount in gold or silver a better long term (30 plus years) investment?
Anyone who claims to know how much gold or silver will cost in 30 years is either lying or mistaken. Obviously there is some risk involved in bonds, but the idea is that as long as the issuer doesn't default, you have a return that's known in advance. With gold and silver prices it is just speculation. Nobody could have predicted 30 years ago that gold prices would have stayed more or less flat through the 80s and 90s only to have a giant spike starting in the mid 2000s.
posted by burnmp3s at 1:15 PM on December 29, 2011 [2 favorites]
Do you mean a paper Savings Bond? If so as of next week those will be phased out. Everything is online now at TreasuryDirect.
Is buying an equivalent amount in gold or silver a better long term (30 plus years) investment?
Anyone who claims to know how much gold or silver will cost in 30 years is either lying or mistaken. Obviously there is some risk involved in bonds, but the idea is that as long as the issuer doesn't default, you have a return that's known in advance. With gold and silver prices it is just speculation. Nobody could have predicted 30 years ago that gold prices would have stayed more or less flat through the 80s and 90s only to have a giant spike starting in the mid 2000s.
posted by burnmp3s at 1:15 PM on December 29, 2011 [2 favorites]
Also if you know about stocks DRiPs can be cool for this type of thing. You can usually get started with about $100.
posted by Busmick at 1:20 PM on December 29, 2011 [2 favorites]
posted by Busmick at 1:20 PM on December 29, 2011 [2 favorites]
For long-term investments, stocks historically substantially beat bonds. A 529 account is probably your best bet. If you just want to put in a small amount, you can buy a little bit of stock fund at someplace like Share Builder, which allows custodial accounts.
posted by Mr.Know-it-some at 1:55 PM on December 29, 2011 [4 favorites]
posted by Mr.Know-it-some at 1:55 PM on December 29, 2011 [4 favorites]
Are the parents starting a 529 account? That way both you and anyone else can add to it. There was just an Ask question about where you can do this so people can contribute online.
posted by DarlingBri at 2:32 PM on December 29, 2011 [1 favorite]
posted by DarlingBri at 2:32 PM on December 29, 2011 [1 favorite]
If past history is an example: In the long term: bonds outperform gold, stocks outperform bonds:
In his book Basic Economics, Thomas Sowell[62] argued that, in the long-term, gold does not hold its value compared to stocks and bonds:
To take an extreme example, while a dollar invested in bonds in 1801 would be worth nearly a thousand dollars by 1998, a dollar invested in stocks that same year would be worth more than half a million dollars. All this is in real terms, taking inflation into account. Meanwhile, a dollar invested in gold in 1801 would by 1998 be worth just 78 cents. (Wikipedia)
posted by ManInSuit at 3:22 PM on December 29, 2011 [1 favorite]
In his book Basic Economics, Thomas Sowell[62] argued that, in the long-term, gold does not hold its value compared to stocks and bonds:
To take an extreme example, while a dollar invested in bonds in 1801 would be worth nearly a thousand dollars by 1998, a dollar invested in stocks that same year would be worth more than half a million dollars. All this is in real terms, taking inflation into account. Meanwhile, a dollar invested in gold in 1801 would by 1998 be worth just 78 cents. (Wikipedia)
posted by ManInSuit at 3:22 PM on December 29, 2011 [1 favorite]
You said that you want to get him a gift to help him start saving - maybe instead of something that sits there until age [whatever], talk to his parents about an actual savings account. The credit union I work for* has a kid's account; there's probably something similar where you are. You could presumably make it a thing over the years: along with actual birthday gifts, a bit of cash in the savings account.
Admittedly, savings rates are ludicrously low right now, but it's a good habit, and might work well with habits his parents want to develop.
* IANAFinancialAdvisor (and how!) and of course this is not professional financial advice.
posted by epersonae at 5:21 PM on December 29, 2011
Admittedly, savings rates are ludicrously low right now, but it's a good habit, and might work well with habits his parents want to develop.
* IANAFinancialAdvisor (and how!) and of course this is not professional financial advice.
posted by epersonae at 5:21 PM on December 29, 2011
I'd get him a US Gold Eagle of this, his birth year. It will at least hold its value over the years, and will always be a special gift from his uncle when he is older. He will never be completely poor if he has an ounce of gold (or more!).
Bonds or other investments are something else you can consider along with this too right now.
Investment type stuff isn't as cool to a kid! He can hold his gold coin in his hands. As long as he won't lose it!
posted by caclwmr4 at 7:47 PM on December 29, 2011
Bonds or other investments are something else you can consider along with this too right now.
Investment type stuff isn't as cool to a kid! He can hold his gold coin in his hands. As long as he won't lose it!
posted by caclwmr4 at 7:47 PM on December 29, 2011
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posted by WorkingMyWayHome at 1:07 PM on December 29, 2011 [2 favorites]