Asked myself - Why do I buy Silver?

The following chart I saw last year answered the question for me.

The relative purchasing power of PM's remains unchanged over a long period of time. For personal reasons, I want to leave my 12 year old daughter something in addition to the eroding value of Dollars, Pounds and Euro's. (Yes I'm British and I have some of all three).

In 1933 Gold was worth $20.67 per ounce ( http://en.wikipedia.org/wiki/Executive_Order_6102 )
In 1933 Silver was worth $1.2929 per ounce ( http://www.presidency.ucsb.edu/ws/?pid=14741 )
Since 1933 the dollar's purchasing power has fallen 94%

Silver may still only be worth $17 ounce, but It's preserved its value much more than fiat currency.
So I'm happy to keep buying silver and leave my 12 year old shiny pretty silver.

 

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Yes, but virtually every other asset has outperformed bullion over that time period.

I also buy bullion but only do it because I am speculating that "this time is different". I think PMs will outperform stocks over the next several years.

 

The problem with hanging your hat on the whole "eroding value of paper money" argument put forth by some PM investors is most investments grow. Sure, if you are looking for an investment you can just bury in the backyard and retain purchasing power, pm is a great option. However, over the long run things like stocks give you dividends and capital appreciation greatly in excess of erosion of dollars.

So, to bury in backyard, pm wins. If you want to compare holding pm versus dollars under the mattress or in a checking account? PM will win. Compare it long term to things like stocks, farmland, apartment buildings, or other types of investments? Pm usually has not fared very well.

 

Preach it, brother!

My folks gave me some money to put into an IRA in the mid-1980s. I put it all into a mutual fund with a 5% front-end load -- that's right, it lost 5% right off the bat.

Today, that investment has multiplied by almost 12 times in nominal dollars. Had I put it into silver, it would be worth maybe 2 or 3 times as much in nominal dollars, and it would have lost value relative to gas, milk, or thousands of other products.

Inflation, according to official figures, has devalued the dollar by a factor of about 2.4 during that same period. Silver has approximately maintained a constant value; in 2011, it was way ahead, but it was terrible from 1990 through 2005 or so (maintaining a nearly constant price in dollars while inflation ate away at that value).

And don't even talk to me about people who went all-in in 2011 at $30-40/ounce. They might eventually sell at a profit, but silver's got to climb out of a very, very deep hole first.

Meanwhile, that mutual fund continues to increase in actual value. Even factoring in inflation, it's multiplied four- or fivefold.

It's not very shiny, not very interesting; it's a lousy hobby. But it's a great investment. Compare and contrast with silver coins.

 

We seem to hear this a lot, and Medoraman covered it pretty well, but let's go ahead and put some numbers to it.

Let's say you had $100 in 1913 and invested it over the years in various small business stocks. Small business stocks have historically averaged over 10%, but let's say you actively traded, made some bad decisions, paid some fees and taxes, etc.. So let's figure a very conservative 5% average return.

$100 invested over 102 years with an average return of 5% would net you $13,807 today.

If you used that $100 to buy silver instead, you would have $1,341 worth of silver today.

This tells us that small business stocks, which actually do something for you to appreciate in value, have performed at least 10x better than silver over the past 100 years.

Of course both stocks and PM have performed better than stuffing dollar bills into your mattress, or keeping them in a non interest bearing account, which is essentially what the graph in the OP represents.

(BTW: If you earned the average return of 10%, you would have $1,515,867, or 1130x more money than your silver would be worth. )

 

I don't mean to sound overly pessimistic on PM. I do own PM, but it represents less than 10% of the money that I have invested in my IRA and my brokerage account.

I also don't just sit on it. I actively flip it for profit, which I use to grow my PM holdings. It's getting a little harder now that our LCS premiums are down, but I'll always keep an eye out for good deals and people willing to pay a premium to remain anonymous or to take immediate possession. (You'd be surprised how many people just don't trust online bullion dealers, or our government, or aren't willing to wait up to a month to take delivery.)

 

I don't know.... Those rolls of silver eagles I bought for $800 each certainly didn't preserve my wealth against an eroding dollar. Cash in those few years might have lost a few percent, PM cost me a ton.

 

I have real estate and other investments and I have to say that PM's are pretty easy to have. Just rent a safe deposit box and leave it in there. You have to pay the rent, but otherwise there are no fees and I am reasonably sure it will be there when I need it. Real Estate eats you up with payments. There is the insurance, land taxes, maintenance, utilities, fees, etc. I'll stick with some PM's, some usable land and even some assets denominated in dollars, just in case.

 

You're just not doing it right! You need to buy right before prices go up, and sell right before prices go down. It's really perfectly simple. It even works with stocks.

 

Is it okay for me to just fantasize about investing in silver if I do it in the Bullion Investing room? Or does that also trigger a wallstreet info-commercial?

 

This will probably go over their heads....

 

I guess my original post was too subtle. I buy silver for my young daughter. I have the vast majority of my investments in stocks, 401k's, life insurance, art etc. But my wife will spend all of that and leave nothing for my daughter, whereas I can give the silver to my daughter when she is a little older without electronic title change and she can do with as she pleases.

 

That's a different matter entirely, of course. If two parties have access to a set of accounts, but one party does not trust the other to preserve those assets for an heir or some other future need, maybe it's time to bring in the lawyers.

I hope you can keep your silver safe until it can go to your daughter.

 

I'm buying small amounts every month as a hobby to replenish all the common junk 90% (which I acquired in the 1990s) that I sold during the peaks at $40 through $30.

This money is my monthly spending money, so it is extra money and not even part of my investing strategies. Though, in the next couple years, I may start adding physical silver purchases as small part of my portfolio.

 

Only one way to find out.

 

Well, it is called Bullion Investing, not Bullion Worship, right? I am pretty sure I talked about apartment buildings and land as investment options, as well as stocks, so how is that a Wall Street informercial? Of is it that any documented investments that do better than pm is banned from discussion in a Investing forum? The OP didn't just say "I like silver, its pretty, and I like to buy it", (which I would agree with him, I love silver), he tried to make concrete economic points, points which we simply disgreed with.

 

I have investments in the stock market and real estate, but as a prepper I buy silver for the inevitable EDITED: See language rules scenario when you can use stock certificates and fiat currency for toilet paper.

 

...and my main point whenever people complain about how much value the dollar has lost over the past 100 years is: "You're doing it wrong". Inflation is motivation to put your dollars to good use and not simply sit on them and expect them to maintain, or even increase in value.

Aside from starting your own business, which isn't for everyone, investing in small business stocks has always offered the best return on investment. If that makes me a shill for Wall Street, so be it.

 

"Aside from starting your own business, which isn't for everyone, investing in small business stocks has always offered the best return on investment. If that makes me a shill for Wall Street, so be it."
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Investing in wallstreet is not for everyone either. That's why I don't frequent Dow Forever Forums. If that makes me a paranoid stacker, so be it. At least I'm in right forum.