Banks .vs. Silver
Comparing Investments: Silver vs. Savings Account from 2014 to 2024
Investing decisions often hinge on predicting future value and growth potential. Two popular options I compared are silver, and traditional savings accounts. Each option carries distinct benefits and risks that can significantly impact financial outcomes. Let's explore how an investment in silver compared to a savings account opened in 2014 might fare over a decade, considering their historical performance and current market conditions.
Investment Scenario 1: Silver Purchase in 2014
In 2014, the price of silver hovered around $19 per ounce. Suppose an investor allocated $10,000 to purchase silver at this rate. Let's calculate how this investment would have grown by 2024, assuming a hypothetical scenario where the current spot price of silver is $25 per ounce (which is under current spot by $5 just to give some wiggle room).
Step 1: Initial Investment Calculation
Initial investment: $10,000
Silver price in 2014: $19 per ounce
Ounces of Silver=$10,000
$19 per ounce≈526.32
Step 2: Current Value Calculation
Current spot price of silver (2024): $25 per ounce (once again, spot is acutally at $29.80 at writing of this article but I wanted to offer wiggle room).
Current Value of Silver=Ounces of Silver×Current Spot Price
Current Value of Silver= 526.32 ounces × $25 per ounce ——Current Value of Silver=$13,158
Therefore, the $10,000 investment in silver made in 2014 would be worth approximately $13,158 in 2024, assuming the hypothetical current spot price of $25 per ounce. This calculation does not account for transaction costs, taxes, or fees incurred during the purchase or sale of silver.
Investment Scenario 2: Savings Account Opened in 2014
In 2014, the interest rates for savings accounts were notably low due to economic conditions following the 2008 financial crisis. Assuming a conservative annual interest rate of 0.5% for a savings account, let's determine the value of a $10,000 deposit made in 2014 by 2024.
Step 1: Future Value Calculation with Interest
Using the compound interest formula:
Where:
P is the principal amount (initial investment),
R is the annual interest rate (as a decimal),
N is the number of times interest is compounded per year (typically 1 for annual compounding),
T is the number of years.
Given:
Initial investment P=$10,000
Annual interest rate r=0.005 (0.5% expressed as a decimal)
Number of years t=10
Thus, the $10,000 deposited into a savings account in 2014, with an annual interest rate of 0.5%, would accumulate to approximately $10,512.70 by 2024. This calculation assumes the interest is compounded annually and does not factor in inflation or fees associated with the account.
Comparison and Considerations
Performance Comparison:
Silver Investment: The investment in silver, assuming the hypothetical current price of $25 per ounce in 2024, yielded a return of approximately $3,158 over the initial $10,000 investment.
Savings Account: The savings account, with a conservative interest rate of 0.5%, grew by approximately $512.70 over the same period.
Inflation Impact:
Silver historically acts as a hedge against inflation, meaning its value tends to increase during times of economic uncertainty or currency devaluation.
Savings accounts, while offering security and liquidity, often struggle to outpace inflation, potentially eroding the purchasing power of the saved funds over time.
Risk and Stability:
Silver: Investing in silver involves market risk, as its price can fluctuate due to supply-demand dynamics, geopolitical factors, and industrial uses.
Savings Account: While generally stable, savings accounts offer minimal returns, which may not keep pace with inflation, thereby reducing their real value over time.
Diversification and Strategy:
Investors often diversify their portfolios to balance risks and potential returns. Allocating funds to both silver and savings accounts can provide a balanced approach, leveraging the stability of savings accounts with the potential growth of precious metals. One might argue that having 10k set aside in lieu of a savings account might work like a certificate of deposit with the difference being, a bank is not making more money than you are on your investment.
Conclusion
Choosing between investing in silver or placing funds in a savings account in 2014 would have yielded different financial outcomes by 2024. The $10,000 investment in silver, assuming a hypothetical current price of $25 per ounce, appreciated to approximately $13,158, reflecting a potential return of $3,158. In contrast, the same amount deposited into a savings account with a 0.5% annual interest rate would have grown to about $10,512.70 over the same period.
Investors be it in a bank or on your own via silver should consider their risk tolerance, investment goals, and market conditions when deciding between precious metals and traditional savings accounts. Historical performance may not predict future results, and market fluctuations can significantly impact investment outcomes. By diversifying investments and staying informed about economic trends, investors can make informed decisions to safeguard and grow their wealth over time.
I hope you enjoyed this article and hope it helps look at both options fairly. I am not a financial advisor but understand math on occasion.
