Should a young girl invest half her modest income into silver?
April 3, 2013 11:43 AM   Subscribe

Is investing half my income into silver a pretty good way to go for my future?

I make a modest 40k a year, however I've manage to put at least 50 - 75% of what I make away. I am a libertarian and want to keep things very, very simple. I do not trust the stock market and do not trust putting my money into the hands of somebody who does not have only my interests at heart.

Having it rot away in a low interest savings is not a good idea obviously, so I started buying silver. I bought around 5k of it last year and have realized it's a great way to put it away in a deposit box and make sure I dont dip into it. My current understanding is that its worth will rise with inflation and then be subject to the market of course. I've been told by many of my similar thinking friends this is the way to go, even over gold because it is a necessary item and not just a luxury item, used in electronics, etc.
posted by JJkiss to Work & Money (63 answers total) 8 users marked this as a favorite
 
I'm unclear why you think silver is inherently more 'trustworthy' than gold because it's 'necessary' and gold isn't - gold is used extensively in electronics.

If you distrust the stock market, why are you willing to trust something that you know will be subject to a volatile market itself?
posted by Tomorrowful at 11:48 AM on April 3, 2013 [35 favorites]


Putting all of your money in just one investment is most definitely not a good idea.
posted by Grither at 11:48 AM on April 3, 2013 [82 favorites]


I've been told by many of my similar thinking friends this is the way to go, even over gold because it is a necessary item and not just a luxury item, used in electronics, etc.

Gold components are used in most electronics. I have no advice regarding silver over gold or vice versa, but I'd suggest being cautious in taking advice from people who advise you without having basic facts on hand.
posted by griphus at 11:49 AM on April 3, 2013 [15 favorites]


Investing half your income into silver is a terrible idea.

If you want to be highly conservative with your income, put it in an inflation-protected security.
posted by Aizkolari at 11:49 AM on April 3, 2013 [11 favorites]


" My current understanding is that its worth will rise with inflation and then be subject to the market of course." Isn't this the same as investing in a stock market that will rise and fall with the economy? I think a fairly low-risk investment portfolio might be the way to go. Silver can rise and fall anytime the economy changes, so I don't see it as any less risky.
posted by photoexplorer at 11:49 AM on April 3, 2013 [1 favorite]


No, this is not a good idea.
posted by modernnomad at 11:51 AM on April 3, 2013 [12 favorites]


Good for you for putting away so much of your income in savings!

I would recommend consulting with a fee-based financial planner (meaning you pay them for their time, they do not get commissions based on what products they recommend) to discuss the best way to invest your savings.

I hope that you are aware that you can put your money into retirement savings vehicles like a Roth IRA or a 401k if that is available at your job, without investing that money in stocks. Don't miss out on the huge tax advantage such accounts provide for your savings!
posted by treehorn+bunny at 11:54 AM on April 3, 2013 [5 favorites]


Silver is subject to supply and demand. Suppose geologists, using new techniques, discover a monstrous huge hoard of silver hoard? Or chemists find a much more efficient way to extract silver from ore? The price of silver could plummet.

Any commodity can go from being scarce to common as technology changes. It's never wise to invest in a chunk of stuff.
posted by musofire at 11:57 AM on April 3, 2013 [2 favorites]


To elaborate: part of minimizing risk is to diversify your investments. So instead of putting 100% into silver, perhaps one might invest in:
20% silver
20% gold
20% savings account
20% TIPS (Treasury Inflation Protected Security)
20% underyourmattress

So if science devises a way to create silver out of thin air, thus causing the price to drop to $0.01/metric ton, then you only lose 20% of your portfolio, instead of 100% if you invested only in silver.

IANAFP, IANYFP, TINFPA
posted by Grither at 11:57 AM on April 3, 2013 [16 favorites]


I bought around 5k of it last year and have realized it's a great way to put it away in a deposit box and make sure I don't dip into it.

You can do whatever you want with your money, obviously, but I would like to share with you a story. When Y2K was a thing, someone I know (someone who is not a stupid person, someone who at the time had a job in finance, someone who would probably define themselves as a libertarian and is "distrustful" about a lot of basic, everyday stuff) turned most of his assets into gold bars and buried them under his house.

I am sharing this story with you because it was immediately what came to mind when I read your question.

Go to a financial adviser. Go to ten financial advisers. Listen to their advice. Do not listen to your "similar thinking friends" because they may all be loonies, too.

Socking all of your money into one thing is just complete flat-out insanity.
posted by phunniemee at 11:59 AM on April 3, 2013 [15 favorites]


Silver tarnishes. It's not extensively used in electronics for that reason. If you must put your money in something tangible, gold is a better bet, even though the price has been driven up lately.

I second everyone here that suggests diversifying and going for tax advantages where you can get them.
posted by domo at 12:00 PM on April 3, 2013 [2 favorites]


Storing tangible assets also comes with costs and risks - the cost of a safe deposit box, for example. You have to put your trust in the bank which holds the box - a bank that you don't control. If you store the product on your premises, you have to pay for storage and security.

I would also recommend talking to someone who is knowledgeable about the various options, and can help you evaluate your return-on-investment vs. risk. I would look into a fee-only financial planner.
posted by muddgirl at 12:00 PM on April 3, 2013 [1 favorite]


Also, I don't think silver is as liquid as other assets. You have to find buyers who are willing to pay market value for physical bars of silver, and in the quantities that you're saving. That could be tough, in a recession that you're saving against.
posted by xingcat at 12:02 PM on April 3, 2013 [1 favorite]


I second/nth treehorn+bunny's suggestion of talking to a financial planner. It's great--and really smart--to get into the habit of saving early on, but I think you have some big misconceptions about your options. Talking to a financial planner doesn't mean trusting your entire savings to one person, it means getting expert advice from someone who can help you take your goals and concerns and create a plan around them.
posted by Meg_Murry at 12:05 PM on April 3, 2013 [1 favorite]


I would think that investing in real estate, which is at (depending on your market) a recent low price would make more sense than investing in silver/gold, which are at near record-high prices. The price of gold and silver is being driven right now by an artificial demand - that being people who are thinking similar to how you are thinking right now, that it is a safe investment. It is not based on a low supply, or high demand for use in the production of goods. It is a bubble that will burst.

Compare that to real estate - you are investing in something that has a determinable value outside of the value as an "investment". Even stocks are based to an extent on real (or reportedly-real) figures.

The typical thinking of the precious metal fanatics is that, should the economy collapse, gold and silver will be used as currency. There are no modern examples of that - when an economy collapses (such as Iraq during the early stages of the invasion), they didn't revert to precious metals - they operated on the barter system. Based on that example, you'd be better off getting land for agriculture, land to raise livestock, and guns.

All that being said - I'd talk to a financial planner, and have a diverse portfolio of investments, some of which may include exposure to gold and silver.
posted by PGWG at 12:07 PM on April 3, 2013 [8 favorites]


Check the multi-year silver price charts down at the bottom of this page and ask yourself if this is a good time to be buying silver.
posted by rmd1023 at 12:12 PM on April 3, 2013 [4 favorites]


I also want to recommend that you hire a fee-only financial planner, if only to expand your horizons of investment possibilities. As a grown woman (not a "young girl", since you are in your mid 30s based on other asks) who impressively is able to save so much and to think about the future, getting educated on the full range of investment possibilities is a great idea and something you might find empowering.
posted by Pineapplicious at 12:13 PM on April 3, 2013 [4 favorites]


Also, what are you saving *for*? Is this a safety net/emergency fund? Are you planning to buy a house? Do you just want a hoard of precious metal? Silver is not appropriate for all of these purposes. (These are, I believe, the kinds of questions a financial planner can help you with.)
posted by mskyle at 12:16 PM on April 3, 2013 [3 favorites]


Do not listen to your "similar thinking friends"

This is the bottom line. You're asking about a topic where professionals are licensed and/or certified. Why? Because like law or medicine, (1) the subject is complex, and (2) what constitutes good advice will depend on a person's individual circumstances. That is why we license and/or certify experts.

I'm sure your friends are well meaning. But unless they are experts, they are not qualified to give you good advice on this subject. Go talk to an expert. Congratulations on your financial discipline, but don't let that go to waste because you didn't exercise financial smarts.
posted by cribcage at 12:16 PM on April 3, 2013 [6 favorites]


do not trust putting my money into the hands of somebody who does not have only my interests at heart.

And the block of silver does?

The only way to put your money into the hands of somebody who has only your interests at heart is to invest in your personal or professional development, like going to the gym to extend your life, getting another degree to increase your earnings, etc. And those "investments" aren't guaranteed, either.
posted by acidic at 12:19 PM on April 3, 2013 [6 favorites]


Also, I'm just going to throw this out there--it's far more likely that you'll see economic troubles similar to those in recent years, than it is that you'll see some kind of apocalyptic total collapse. There are strategic ways to manage your savings and investments to minimize risk so that if there were some type of deep trouble with the stock market as a whole, your retirement accounts would be minimally impacted. It is smart to be prepared for economic downturns, and to set goals and create a plan. It is not, however, wise to base your savings decisions and financial plans on the possibility of a total meltdown.
posted by Meg_Murry at 12:20 PM on April 3, 2013


$5,000 worth of silver purchased exactly one year ago today is now worth exactly $4,125. Historically, silver's beta (a mathematical measure of price volitility) is about 0.7, making it almost 5 times more volitile than gold. Furthermore, your ability to liquidate silver in the event of some unspecified economic catastrophe is likely to be significantly more difficult than gold.

I'm not entirely sure how to approach the problem, but if you are purely choosing between metals, gold seems a much lower risk choice than silver. I'd encourage you to reconsider other investment options.
posted by Lame_username at 12:21 PM on April 3, 2013 [25 favorites]


Good on you for saving. However as others have said, you really need to diversify more than you are doing. I would probably have at most 20% of your savings in precious metals maximum, and that's not just silver but gold/silver/platinum -- all three have significant industrial uses and are investment-worthy (if you want to invest in physical metals).

The problem with buying and taking physical possession of metal (e.g. coins, bars, bullion, whatever) is that it's really expensive. You are paying the equivalent of very high commissions when you buy it and sell it, in the difference between the market price of the metal and what you're actually paying to buy it, have it shipped to you, keep it in a safe-deposit box, and then turn around and sell it later on.

Also, you will pay really high taxes on the gains realized on physical metals. Basically you will pay the worst possible capital gains tax rate (23% IIRC) on the increase in value between when you buy and when you sell. And the expenses incurred in the investment (safe deposit box fees, etc.) are not deductible unless you itemize your deductions and they exceed 1% of your total income in a year, which for someone making $40k is $400/year. Basically, you get really screwed ... it may not be apparent now, but it'll be really painful down the road when you have a big pile of silver and you go to sell it (e.g. when you retire) versus more tax-advantaged investment strategies.

Lots of people who are bullish on silver/gold will buy mining stocks rather than physical metal in order to basically track the price of silver/gold but avoid the downsides of physical metal ownership. This is something to consider.

In general I think you'd do well to meet with a fee-based financial planner and talk over a "big picture" strategy that includes not only metals but also some equities, maybe some mutual funds, and TIPS or I-bonds if you are concerned about inflation.

And all the standard financial-planning advice applies: before you start buying stuff like metals or individual equities, you should make sure that you have all your interest-bearing debt paid down and you've maxed out your Roth IRA contributions for the year. The tax advantage of a Roth IRA will beat the living daylights out of any other long-term investment strategy, and particularly if you expect tax rates to increase in the future (as you would if you thought the US Government was on an unsustainable path, as many libertarian-leaning folks do).

Also if you haven't filed your taxes this year yet, one of the options for your tax refund is to get it in I-bonds rather than cash ... I think this is a really nice thing, and I always try to stick at least a few hundred bucks in them every year when I have a refund.
posted by Kadin2048 at 12:24 PM on April 3, 2013 [7 favorites]


...do not trust putting my money into the hands of somebody who does not have only my interests at heart.

Selling your silver is dependent on doing business with people who want nothing but to get a better deal than you.
posted by NotMyselfRightNow at 12:25 PM on April 3, 2013 [10 favorites]


I'm not going to try to convince you that your silver plan isn't a good one -- plenty of people are doing that. What I will say is that, to be consistent with your beliefs and lack of trust in anyone who doesn't have only your interests at heart, you should move your life savings out of a bank's safety deposit box and into a safe on your property.
posted by Houstonian at 12:30 PM on April 3, 2013 [1 favorite]


For a number of years, "invest in gold!" companies were advertising heavily on for example Fox News. They are paying to advertise there, to an audience that is not terribly market-savvy -- they're paying because it benefits them in the form of commissions and other payments, and they benefit when the market price of gold goes up. So the market price of gold has been supported by all the people who have bought into what the advertisements are saying -- in other words, the demand for gold and thus the price is artificially inflated by these ads. So (1) gold costs more to buy now, so it's not a bargain at all, and (2) if someone shows you a graph of gold prices climbing, remember that you don't know how much of that climb is attributable just to the ad campaign -- so when the ads stop, and everyone tries to sell their gold, the price will plummet and those investors will be selling at a loss.

Now, it seems that the next big thing on those channels is advertisements for "invest in silver!" companies. I imagine this is because gold is starting to feel like old hat, and people no longer believe that it's a lesser-known strategy to invest in gold. So naturally, the companies have moved on and are applying the same sales pitch to another familiar, fancy-sounding metal.

If you and your like-minded friends have recently started thinking, hey silver would be a great investment, it is possible that either you are seeing these ads, or talking to other people who have been influenced by these ads. Remember that if an investment is really a great secret of savvy investors, it will not be advertised on TV. Savvy investors will keep it as secret as they can. On the contrary, if some company can make money by selling something to customers who don't know a lot about investments, that company is very likely to advertise its "great investment" on TV.
posted by LobsterMitten at 12:35 PM on April 3, 2013 [13 favorites]


No, this is nuts, and even putting something like 10 or 20% of your money into silver would be too much. If you are going to invest any money in precious metals at all, do it via a mutual fund, because mutual funds are liquid.
posted by MoonOrb at 12:37 PM on April 3, 2013 [2 favorites]


In fairness, Mutant used to recommend gold and silver. However, I wouldn't call him anti-markets or anti-banks, at all. Obviously he wasn't only about precious metals.
posted by Houstonian at 12:41 PM on April 3, 2013


Selling your silver is dependent on doing business with people who want nothing but to get a better deal than you.

Came in to say the exact same thing. Silver (or gold, or wheat, or LIBOR swaptions, or whatever) is subject to manipulation to the same, or potentially greater, levels of manipulation as the stock market. At least with the stock market you have the SEC looking out for you; not so with physical silver.

This is a bad idea.
posted by Admiral Haddock at 12:41 PM on April 3, 2013 [2 favorites]


My current understanding is that its worth will rise with inflation and then be subject to the market of course.

If this is your level of understanding of how commodity markets work, my suggestion to you is to take an introductory commodities economics course at your local university.

I don't mean that offensively, I just think that if you think that commodity worth rises with inflation automatically, you need a primer in the basics of economics to evaluate a strategy like that and you do not currently have that.

IAAE. IANYE.
posted by Rodrigo Lamaitre at 12:41 PM on April 3, 2013 [11 favorites]


Obviously he wasn't only about precious metals.

Yeah, in also fairness, he is a finance veteran and PhD, and (if I remember correctly), semi retired after having made himself comfortable from years working in the City. I have the utmost respect for him and his posts, but pointing to his post history doesn't strike me as terribly relevant here, given the stark disparity between their resources and (if you'll pardon me, OP) levels of investment sophistication.
posted by Admiral Haddock at 12:48 PM on April 3, 2013 [3 favorites]


Silver and gold can be a good short-term investment if you are expecting the market to tank very soon. However, if financial markets ever get so chaotic that silver and gold become a good long-term investment, then we are talking about a scenario where you would probably be better off investing in a shotgun, ammo, a water purifier, and iron rations - because society will have collapsed.
posted by wolfdreams01 at 12:51 PM on April 3, 2013 [1 favorite]


Diversity is the key to reducing risk. Putting so much money into one thing, any one thing, is by nature risky and potentially volatile. So the answer is it's a terrible idea.
posted by Dansaman at 12:56 PM on April 3, 2013


"I've been told by many of my similar thinking friends"

That's your problem, right there, in a nutshell. You will never get the best advice from a group of people who already think similarly. That's where bad ideas flourish. You're on the path toward making a financial mistake, and you're seeking advice from people who are likely to make a similar mistake.

The entire point behind diversifying your investments is to protect yourself in case one of them (SILVER, perhaps?) tanks.
posted by 2oh1 at 12:59 PM on April 3, 2013 [6 favorites]


Know also that putting assets (cash, etc.) in a safe deposit box doesn't keep the Feds from getting their paws on it if they come after your assets (for back taxes, etc.).
posted by nacho fries at 1:03 PM on April 3, 2013


There is a place for silver or gold (or commodities in general) in a diversified portfolio. That place is not front and center.

What is the nature of your mistrust of the stock market? Do you distrust it as a general thing? Do you think the market is currently overvalued? Do you dislike "the man"?

This should appeal to your libertarian instincts: The Permanent Portfolio. You put 25% in stocks (S&P, for example), 25% in cash, 25% in gold, and 25% in long term bonds. The theory is that whatever the economy is doing (growing, shrinking, etc), something in that portfolio will be doing well enough to counter the others. Rebalance every year.

This is just a particular kind of diversified portfolio and, as most people will tell you, diversification is the key here. Oh, you can quibble about the percentages, but it's a nice, simple approach and, unlike a lot of the investment strategies you see tossed about, isn't completely stupid.
posted by It's Never Lurgi at 1:07 PM on April 3, 2013 [3 favorites]


I noticed you said you're a libertarian. I know several of them. They have great grasp of how economics should work rather than how it actually works. Please go see a financial advisor and don't listen to your libertarian friends.
posted by chairface at 1:09 PM on April 3, 2013 [9 favorites]


Right now, silver is comparatively high (on a long, long term curve). If you have inherited a shit-load of silver from your grandparents, you should sell it right away, and invest in something with a more long-term prospect.
I have no idea of what is sound globally, and the advice I might give you based on my local situation might not be sound for you where you are. There's lot's of good advise above, though
posted by mumimor at 1:10 PM on April 3, 2013 [1 favorite]


rmd1023> Check the multi-year silver price charts down at the bottom of this page and ask yourself if this is a good time to be buying silver.

Yes, do this. Specifically, scroll down to the bottom and check the 2000-2013 box, then click on "View Charts".

Those spikes and then massive drops in the first half of 2011 have a story behind them: the margin rules were changed in order to minimize speculation in the commodities markets. Silver, after its improbable rise, got poleaxed. Other commodities took a hit as well, but silver took the brunt of it. I lost a fair amount of money as a result of this.

Today was a bad day on the stock markets, due to disappointing jobs news for March. The indices took a 0.75 to 1.00% hit. Did precious metals do well? No, they did not: you can see this for yourself by going to this site and clicking on the graph icons next to gold, silver, and platinum.

Silver (and gold) may end up doing fairly well in a longer run. But the serious bears I follow seem to think that there will be a deflationary crunch before any inflationary period. And therefore there will be a better opportunity to buy gold and silver before they have their next runs up.
posted by UrineSoakedRube at 1:11 PM on April 3, 2013


A year and a half ago you posted a question where you said you were 30 years old. In terms of financial planning, you are not "a young girl" anymore, and investing all your savings in physical silver is an extremely risky retirement plan. Please see an actual financial planner for advice. The money you've already earned has more time and potential to grow into a comfy nest egg than the money you'll earn when you're in your 40's, 50's, or 60's, so it's vital to start investing smartly now.
posted by keep it under cover at 1:17 PM on April 3, 2013 [6 favorites]


If I wanted something concrete and useful to invest in, I'd invest in real estate. Silver is not particularly useful except insofar as you can turn it back into USD. Land is always useful, even if you can't sell it.
posted by tylerkaraszewski at 1:25 PM on April 3, 2013 [1 favorite]


Is investing half my income into silver a pretty good way to go for my future?

No. Seriously, since you had enough concern in your mind to ask this question in the first place, please look at all the advice in this thread. There's not one response here (at least on a quick skim) that thinks putting half your income in silver is a good idea.
posted by RedOrGreen at 1:35 PM on April 3, 2013


It isn't a bad idea if you don't mind losing 2/3rds of your savings. Check out this long-term chart of silver prices. By eyeball, it is usually about $10 per ounce. Now it is closer to $30 an ounce. If it reverts to the mean, which is certainly not impossible, you will lose significant value.
posted by procrastination at 2:01 PM on April 3, 2013


Felix Salmon's piece today on Bitcoin (another appealing value store for libertarians) makes some useful broad points about commodities, currencies, and the difference between them.

There is no single investment that has a shiny magic forcefield to protect it from other people's interests. Diversification is a means to balance out those interests.
posted by holgate at 2:11 PM on April 3, 2013 [1 favorite]


Silver is becoming attractive because, I've been told from several sources, silver's value was, over the last few decades, appreciating in rough proportion to gold's value. Lately, though, gold is blowing up like crazy, and it's getting so some people think silver should do the same thing. Others argue that gold is ballooning, and silver's not going anywhere.

Silver's really attractive to one mind-set, and kinda meh for the other. It's a popular obsession, but that doesn't make it a good investment; lots of people have made money on these things, but generally only when they cash out.

Half your income into one investment? Hell no. Diversify, absolutely. You've got ~35 years of labor income ahead of you, so you can afford much more risk than someone 10, 20, or especially 30 years older than you, but ask yourself whether you can afford to lose it all, or half, a third.

Going only on silver is a complete gamble.
posted by Sunburnt at 2:18 PM on April 3, 2013


In the market, no single thing is profitable in the long run. Investors see profit, they run to it, they flood the market, and those who don't get out lose their shirts. It doesn't matter what it is. Law school. Gold. Tulips. Bit Coin. Start Up stock. If you put your money somewhere and forget about it, you will lose your shirt.

This is true with silver. If we run out of silver because a bunch of survivalist libertarians buy it all up, some savvy entrepreneur will figure out how the world will live without silver, and your metal becomes worthless.

If you don't trust other people, invest in yourself. Invest in your career. Invest in your health. Invest in a corner of the world that will sustain yourself, real estate, chickens, victory farms, what have you. This will not give you a high return, because it is not only extremely conservative, but also removes a bunch of the gains that capitalism acheives through specialization. But it is a retirement strategy that is consisten with your world view and expectations for performance in the future market.

But the core of libertarianism is that markets work because of self interested parties. You simply need to find someone whose livlihood rests on helping you retire.

I am not a libertarian. I believe in both the power of markets and regulation. But I think one of the most accurate criticisms libertarians level with the current state of affairs is that we have created markets where chasing tax savings is more profitable than chasing innovation. So for gods sake, don't ignore the massive tax opportunities that the government offers. If you want to buy silver, buy it through a 401k or Roth IRA.
posted by politikitty at 2:39 PM on April 3, 2013 [3 favorites]


Look at the price fluctuations of silver in the last 50 years. Are you confident that you will only want to use your silver during one of those peak value times, and not the troughs that it is usually in?
posted by jacalata at 2:41 PM on April 3, 2013


I'd like to add: I understand you are scared of professional advice, after it has gone so incredibly wrong. It is really difficult to trust anyone. I'd trust someone, but that is on the basis of personal relationships and following business trends for decades.
Gold and silver are classic investment values. They are not as steady as you might believe, but depending on your time frame also not terrible. Another value in this mindset is land. Land has been terribly devalued since 2008, with good reason. Not all land is equally valuable, and no land is worth what 00's speculation thought. But some land is probably the most secure investment any person can get over time, if that time is 20+ years. You don't get richer, but you don't get poorer, either. With a small subset of land, you get crazy rich, but forget that. You don't know enough.

Actually, what politikitty said: a good education leading to a job you love. A family you feel at home in, a home or two to house that family. If all of these choices are sound decisions, life will work out, through good and bad.
posted by mumimor at 2:48 PM on April 3, 2013


If you want a good libertarian-approved investment, may I recommend land to you? Unimproved farm land—"unimproved" means no dug wells or power or roads—is often used for wheat and peas, which don't require irrigation. Such land has incredibly low taxes (sometimes just a couple thousand a year for more than a hundred acres) and has a great return in terms of crop. Generally, tenant farmers work the land and receive a majority of the value, and the owner receives a smaller percentage. It's not that difficult to make by your initial investment over 10 or 15 years—plus you still have the value of the land, which will have, most likely, gained in value. (Plus it's somewhere to live in case someone cuckoo takes over the country!)

There are of course risks here too. Land values change over time; crops sometimes fail. That being said, the price of wheat has grown significantly due to things like climate change.

Also... the government sends you a check for being a farmer. (I know, it's crazy. You don't have to cash it.)

Silver and gold (and the like) fluctuate in value due to forces that are harder to predict or control or even understand. I don't like keeping my money in such things. (I'm not a huge fan of stocks, either.)
posted by RJ Reynolds at 3:29 PM on April 3, 2013 [1 favorite]


The only two things that have proven to increase in value over time in all circumstances and all societies (since human society began) is a. productive agricultural lands (even if it is just good hunting grounds) b.human know how and skills appropriate for the circumstances(whether programming computers or chipping flint).

The value of gold and silver has pretty much been the same in terms of purchasing power since the roman empire (an ounce of gold will buy you a professional suit or a purple toga and an ounce will buy you a modern rifle or roman gladius and shield) on the average. However that 'average' thing can really kill you if have to sell something as short term volatile as gold in one of the down periods or buy it during an up period (and right now is an up period in terms of historical valuations).

So hire a professional, diversify and if you are unsure about one persons advice, hire another professional for advice and see if they match. And when hiring someone for their advice (financial, home inspection, real estate) don't pay them on commission, pay them per hour and pay them first. It is money well spent. If they give you bad advice or you don't like them, well you just paid for that knowledge. If they are working on commission they want to string you along until they get their payday. A fee for services rendered is the most libertarian of ideals and the most likely to result in honest advice givens, and always, always get a second opinion if in doubt.
posted by bartonlong at 3:47 PM on April 3, 2013 [2 favorites]


Congratulations on setting aside all of that money in savings! That is quite an accomplishment.

As others have said, you should diversify. I can see how silver would seem like a less complicated investment than the stock market at first glance. It's tangible, it seems more "real." But really, once you start looking at companies you like within the stock market it's less of a mystery. For example, I shop at Costco and Amazon all of the time. I think they're good companies and I know they're reliable. So I bought some Costco and Amazon stock. You never want to invest in a company you don't understand, but most of us can find stocks that relate to areas of our own knowledge.

Real estate is a good suggestion, but I would look into a REIT (real estate investment trust) before delving into the mess of property management and weird tax laws that you face as a landlord.

Anyway, I second the suggestion to talk to a financial planner about your goals. It sounds like you're off to a good start.
posted by Ostara at 4:20 PM on April 3, 2013 [1 favorite]


I agree with answers that investing most of your money in X is usually a bad idea. Also, silver seems like a trendy investment right now and where investing is concerned, trends are bad. Investing is about the long-term while trends are not.

I also have concerns about how this would work in a practical sense. What if you needed that $5000 right now? If I needed $5k right now, I'd pull it out of my checking and/or savings accounts. What would you do? Go to the deposit box, take the silver out, find someone willing to buy silver? If you want to talk about someone who does not have your best interests at heart, the guy buying silver from you when you need money right now is your guy.

I could go on but no, I do not think it is a good idea to do this thing.
posted by kat518 at 4:27 PM on April 3, 2013


I would not invest all my money in silver.
posted by J. Wilson at 4:54 PM on April 3, 2013


I'm going to talk to you as a libertarian for a minute here, because while I think you've gotten some very good advice about investing, it's not clear to me that you're getting answers to the underlying political and economic concerns that have brought you to your current position. Those of you who aren't libertarians or strident capitalists can tune out this comment, because I'm addressing myself to JJkiss and other people who believe one of the central tenets of libertarianism: that large groups of people, each acting in their own self-interests and without constraints on their liberty from outside forces, will produce a better-functioning, more prosperous society than those same people would if a centralized power used force to try to centrally plan a system more suited to the best interests of all.

I'm not trying to be rude, but I'm honestly trying to figure out how you square your position that you don't trust the stock market and that you only want to invest your money with people who have your best interests at heart with your claim to be a libertarian. You're basically saying that the best system we have for creating wealth and value over time, the trading of goods and services on the open market, is untrustworthy. Moreover, you're saying that the entire free market system is untrustworthy except where it's setting prices for the buying and selling of precious metals, in which case it's totally trustworthy and awesome and will make you rich. I find that really odd, but more importantly, I find it to be at odds with your stated political and economic beliefs.

The price of a share of silver is, as you well know and have ably articulated in your post, based on the beliefs of you and others that people at some point in the future will be willing to pay a lot of money for silver to put in their electronics and jewelry and whatever else they want it for. The price isn't magic: it conveys information about how many people want silver, and about what its highest and best use is, and about whether people expect to need more silver in the future. Prices are just data.

But in the same way, the price of a share of Apple stock is just data. It's data about how much it costs to make an iPad and how much people are willing to pay for an iPad and how many iPads people expect Apple to be able to sell. It's information about whether we think that the future leaders of Apple are going to be as good as Steve Jobs was at inventing new toys we'll all want to buy. It's information about whether we think there's some kid in his parents' basement right now building a time machine/mp3 player that will be so awesome it will put Apple out of business. That price is just data.

And the value of the stock market is also just data. At root, the price of a fund that is an amalgamation of the top 500 highest-producing publicly traded companies in the US is basically a referendum on the current state of the economy and a prediction about whether the US economy is going to prosper over time. Those prices are data about whether we think that our society is getting better and richer, or whether we're worried that it might be getting worse and poorer. But either way, it's just data. And either way, unless you believe that there's some grand conspiracy to mislead us all about the actual prices people are paying for a share of stock, that data is useful in determining what to buy and sell.

But more importantly, the price of silver is determined in the same way the price of stocks is determined: by other people who don't care at all about whether or not you get rich, because they're too busy trying to get rich themselves. The whole point of capitalism, as Adam Smith says is that "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love." When you say that you "do not trust putting my money into the hands of somebody who does not have only my interests at heart," it reads to me like you don't get that. Because the point of capitalism is that you don't have to rely on someone else to do what is best for you while you sit by passively and wait for them to deign to give you something; you get to rely on everyone doing what is best for them to create economic growth that you can benefit from.

Based on my own belief that liberty and free markets tend to make things better over time, I invest my money in a diverse array of companies with proven track records of creating wealth over time. I invest in index funds that track the value of the stock market because I believe that creativity and ingenuity are going to create new technology and medicine and snack foods and luxury vacation packages and energy and stuff I've never even heard of that people are going to want to pay money for and that are going to make us all wealthier and better off. I also invest quite a bit of my money in markets in developing countries, especially in south Asia and Africa, because I believe that we're just now starting to see the benefits of economic and political liberty for people in the developing world, and that those people, as they become more free, are going to make and do awesome stuff that will be worth a lot of money in the future. And just like the butcher and the baker want to get rich off of selling me dinner, I want to get rich off of helping newly free people make money by participating in the market economy.

The point is that I invest in the market, because my economic and political and moral beliefs lead me to the conclusion that the free market is the single most efficient method we've ever created for making people, in aggregate, wealthier over the long term. Your friends, essentially, are running scared from the free market, and they're advising you to run scared from it too. If they believe that the government is somehow going to stop that growth from happening, well then, they're stupid to be putting their money into anything other than food and guns and survival gear, because if capitalism collapses, no one is going to buy their silver, because there won't be any electronics or luxuries or anything else. But if they believe that free markets will survive, and they're still telling you that you should be running scared from that awesome wealth-creating machine, that you should be putting your money under your mattress instead of actually engaging with and investing in the market as it grows, then you're not manifesting a belief in any form of libertarianism I recognize.
posted by decathecting at 5:43 PM on April 3, 2013 [26 favorites]


I agree with everyone telling you not to invest all of your savings in silver. Diversified portfolio, etc., etc. Disclaimer: I work in finance, but I don't advise retail investors, and obviously not your adviser, etc.

That being said, it's not a bad idea to invest a portion (not all!) of your money into precious metals. I just wanted to point out that you don't need to go to the hassle of obtaining the physical commodity when you can just trade the ETF. Both gold and silver have very liquid ETF's that track the price well. GLD and SLV are the most commonly traded ones. Yes, there is an expense ratio of 25-50bps per year, but I'd gladly pay that considering the liquidity (in other words, if you really need the cash or want to get out for whatever reason, you can easily sell it at a fair price) and not having to bother with getting the physical bars and storing them someplace. Now your hardcore libertarian friends might tell you to never trust those sneaky ETFs and to keep the silver bars next to the shotgun and can of beans under the bed, but I'm just saying...there is an easier way.

"Historically, silver's beta (a mathematical measure of price volitility) is about 0.7, making it almost 5 times more volitile than gold."

I just wanted to point out that this isn't correct. Roughly speaking, you can think of a stock's beta to a benchmark (for example, the S&P) as a measure of how much you expect it to move relative to the benchmark, based on how they have moved over a given period in the past. So in other words, if silver's beta to the S&P is 0.7, it means that if the S&P is up 1%, then based on the beta, we expect silver to be up 0.7%. This does not mean that a security with a beta of 0 is necessarily less volatile than a security with a beta of 1, it just means that it is uncorrelated with the benchmark.

Someone above mentioned trading the gold mining stocks, but I'd stay away from those if you just want the pure exposure to gold. The gold miners have massively underperformed the price of gold over the past few years. There are a number of reasons for that, but I'll just throw this out there: 1) if you're picking individual gold mining stocks, you have all sorts of specific risk to the particular company, e.g. whether or not they find more gold, have the capital needed to exploit their gold finds, etc. 2) if you trade a gold miner ETF like GDX, you're paying an expense ratio anyway, so why not just trade GLD?
posted by pravit at 5:52 PM on April 3, 2013


A libertarian who doesn't trust markets isn't a very good libertarian.

Stay away from metals unless you know what you are doing. Gold is only high because people are buying it for investments and quasi-investments (50% jewelry and 40% financial). I can't find the numbers on silver, but I'd imagine it's similar.

Invest in a well-regarded mutual fund. They make money when you make money. Better to have the same interests as the people you trade with than to somehow force them to keep your interests in mind.
posted by gjc at 6:40 PM on April 3, 2013 [2 favorites]


I just wanted to give one more warning about comparing betas, because on second look I don't think my explanation above was sufficient. You can think about beta as making a scatter plot of the returns of the stock and the benchmark, and trying to fit the best line. Here's gold's 1 year beta to the S&P using daily returns. Here's silver. There will always be some line that fits "best", but if your dots are all over the place, it doesn't have much meaning. Look at how spread out those dots are compared to a chart like this (beta of financials). In other words, even though the beta comes out to be 0.2, we don't really think that gold will be up 0.2% if the S&P is up 1%, or that the move in gold will be smaller than that of silver. You can interpret that chart as showing that there were plenty of days when gold moved together with the S&P, and plenty of days when it moved inversely. 0.2 is just the slope of the line that fits best. Same for silver - although there is more of a slope to its line so it has a "higher" beta, the dots are clearly all over the place.
posted by pravit at 6:50 PM on April 3, 2013


I know it's a long-shot but what if your bank is destroyed by fire or some other disaster? Even if the FDIC does pay you market value for your physical silver, you'll have been forced to sell at some time that wasn't your choice. In my opinion, investing in a piece of jewelry or ingots or something like that would be unwise. I think the best investment is real estate - either buy your own home or if you have a home, upgrade and use your old place as a rental. Turn it over to a management company if you can at least come close to breaking even or making a profit.

Also I'm jealous of your extreme savings discipline. Nice work.
posted by bendy at 8:00 PM on April 3, 2013


If you think silver is a great investment because it's not volatile, well, you should check the chart and consider what people in 1980 were thinking before the price of silver went from $49 to $5 per oz.
posted by TheNewWazoo at 9:16 PM on April 3, 2013


I'm terrible about money but even I know that there is a reason that there *is* a meme about "silver = investment/future!!!"

There are people who have already invested in silver. They want to realize their investment and sell off silver to newbies who are willing to buy high (a la "buy low, sell high").

If you hear about an investment scheme in the news that isn't couched in terribly "no guarantees," it's probably way way way past its prime.

I paid $14 for a couple of (troy[?], natch - weighs less than an ordinary) ounces of silver bullion. Last I checked, it was worth $80 or so on the exchange. I'd be lucky to sell the bullion at $55 at a coin&stamp place. Exchanges won't touch physical goods.
posted by porpoise at 9:24 PM on April 3, 2013 [1 favorite]


I am no libertarian, but I agree with what decathecting posted.

And if you agree with that (and I'd suggest, as a libertarian, you probably should), I'd add this:

If you believe in markets, then you ought to believe that companies have the ability to really generate real wealth. If you own a part of a company (as you do when you buy stocks), your wealth can grow by tapping (albeit perhaps indirectly) that very real ongoing creation of real wealth. The company does not have to be some special great pick. In fact, many people invest in broad markets, though index funds, to tap the general faith that the market can grow wealth.

On the other hand, if you buy silver, or gold, or pretty much any other commodity, you are not tapping into that ability of the market to grow wealth. Unlike firms, which are hustling, and competing, and trying hard to make stuff and beat other firms, your silver is not doing anything. It's just sitting there. Its price may go up and down, but trying to predict those ups and downs is at best a form of gambling- maybe gambling you think you can be good at, maybe not. But there's no inherent upward trend resulting from wealth-generating business activity such as you see if you own part of a company.
posted by ManInSuit at 9:31 PM on April 3, 2013 [2 favorites]


Suppose geologists, using new techniques, discover a monstrous huge hoard of silver ore?

Right in line with what musofire said here, Mongolia's Oyu Tolgoi mine which is a massive deposit "reckoned to be the greatest unexploited reserve of copper, gold and silver on the planet" was discovered near the turn of the century and is gearing up production as we speak. (Er, as we type.)
posted by XMLicious at 2:28 AM on April 4, 2013


Since you asked this question, silver has lost 21% of its value.

So no, it's not a wise investment--just in case you needed one more piece of evidence.
posted by yellowcandy at 12:55 PM on April 15, 2013 [3 favorites]


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