Should I Invest In Silver?
When it comes to investments, there are many options on where your money could go with a multitude of possible outcomes. This article is designed to help educate you about silver as an investment but also show you a way to buy silver without investing. Before you ask the question of should I invest in silver, you must first ask, are you in a position to invest at all? I will state that I am not a financial adviser and odds are neither are you. That does not mean that logic and facts cannot be used to come to common sense conclusions. After all, there is no computer model or financial advisor that can calculate the human condition when layers of stress, fear, or anxiousness are present. There was a study I looked over a few months back that took the largest sample size of individuals with a net worth of over a million dollars and found that one common denominator was eliminating debt.
Over 10,000 Millionaires studied.
There are many financial personalities with many perspectives on debt. Some prescribe using debt in a way that works for you, such as taking out loans on rental properties to create passive income. Others say that debt should be avoided like the plague. If I use the data laid out in the study of over ten-thousand millionaires, I would have to defer that debt should be avoided at all costs. So the answer on should you consider investing in general lies with your understanding and willingness to mitigate risk by eliminating debt.
So let’s say you are in a position where you think solid investment contributions (beyond standard retirement) need to be made. Is silver a good option? There are many views on this question but many are comprised of “what if” scenarios that tend to be fear motivated. Fear is never a good cause for investments for it clouds truth and judgement. To borrow a quote from a recent senator, “we must always remember that when passions are most inflamed, that fairness is most in jeopardy” I find this to be very relevant in the marketing of Silver. It seems that any television network such as news stations, that market towards individuals over 40 with advertisements about silver and gold as an investment using fear as the main motivator.
It is normal for products to be advertised on TV and other media outlets but we have to ask ourselves why? Why do these companies want to sell silver to you if they think that silver is the way of the future? Why do they think they can make a better move for their company offloading silver rather than holding it if they believe the upside is so strong? These are just simple observations I notice.
Do we have other investments in the market place advertised like this? Is this normal? This is where the anomaly starts to unwind. We see commercials for Coca-Cola asking for you to purchase their product, not the stock. We see Apple, Mercedes, and Wal-Mart with many commercials about products they sell but we are never told to invest. So if the largest companies in the world are more worried about you buying from them than investing in them, what does that tell you about the commercials you see about buying silver coins as an investment?
What it seems like is that companies that sell silver will have a stronger business if they sell to you rather than hold the silver as investment assets. This is an observation that coincides with many in marketing and psychology. If fear can be used as a tool to sell, it is hard to beat. We all know inflation is high and that assets like silver and gold may help hedge against those. That is an argument that is supported but there are limitations to what has to be true for silver, gold, or any other commodity to be truly worth its weight.
In example, if we have economic turmoil and the dollar is significantly weakened, even more than it is currently, do you think you could walk to a gas station and hand them silver coins for a tank of gas? Even if silver were to rise to $100 an ounce you would have to transfer it to common currency in order to do most transactions, especially seeing as the majority of transactions are trending to online. In this scenario, you would still have to part with your silver as needed.
In this scenario, would silver be a better option than mutual funds or single stocks? Maybe! Single stocks are volatile just like silver or gold. We have seen how bad press or earnings can cause massive sell-offs of single stocks, devaluing the shares. There are situations where as an investment it is possible silver may do better but there are many that would far outpace silver. Here is an example. How likely would it be that a brand associated with the Nazi regime would have survived World War Two and still be a thriving brand today? Ever Heard of IBM, Volkswagon, Hugo Boss, the Associated Press, or Bayer? All of these were companies either founded or associated with the Nazi party of World War Two and are giants of industry today. The reason I bring this to your attention is that in the event that a country is dismantled, well made products and business usually survive.
This being said, as an investment many single stocks would have a high upside over time but the real winner would be strong mutual funds. Comprised of a blend of many companies, the risk is mitigated much better than single stocks or silver. This is a law of averages that tends to trend better over time seeing as fund managers daily are buying and selling to best move towards investment goals. Another plus side would be compound interest which builds over time so dramatically that Einstein called it “the 8th wonder of the world!”
Click image for a mutual fund calculator to run the numbers yourself!
All of this being said, it would seem that silver may not be the best investment but those who currently stack or collect silver tend to know that. For those who have done their research and buy silver, it is almost always in an attempt to offer diversification of assets which makes sense. Every single time the stock market has crashed, it has rebounded. This being said, silver makes complete sense not as an investment but a hedge to protect investments such as this scenario.
Let’s say the market crashes and I have $500,000 in mutual funds that now have a value of $175,000. This is extreme but it makes this point clear. If I were to take my money out, I would lose $325,000. It does not take a scientist to figure that out. The amount of time it takes for the market to rebound back to its pre-crash level on average is 95 days according to a recent Forbes article. This being said, you would be silly to take your money out due to fear, knowing that it will eventually rise and exceed previous levels.
This is where silver comes in. In the event that a market crash happens like laid out before, silver or gold are on hand commodities that would likely rise in value to keep with our outpace inflation as volatility of the market rises. This is a scenario where silver really shines. We would want to use silver to protect the large amounts of invested money so that we could get through the recession without losing assets, after all you only lose money in the stock market if you take it out!
If you had, over time purchased $50,000 worth of Silver at an average of $25 and ounce, you would have 2,000 ounces of silver that just sat in a closet or safe waiting for this moment. Let’s say the value rises to two different levels that “experts” often cite as realistic numbers. So your 2,000 ounces are now worth $40 an ounce. That means your $50,000 in silver is now worth $80,000. If silver were to go as some experts say, to $100 an ounce, then you would have $200,000 in silver. As you can see, either one of these amounts would be enough to get you through a market recession without touching your next egg.
This would also increase the likely hood that your regular retirement contributions could remain and would be a good time for additional contributions seeing as when the market is down, stocks are on SALE! So where does that leave silver as an investment? Honestly, as you have seen, silver is probably not a good investment so that may not be the best word. What silver is excellent at is holding a value that you can use it to protect investments.
One sure fire way you can slowly start to collect silver and still follow great investing advice is to get out of debt, invest in your retirement, and collect silver over time rather than invest. Set a budget monthly that gets you to a point where you have up to but not over 10% of your assets in silver. Maybe even choose coins, bars, or rounds that bring enjoyment to you beyond the silver weight.This is all you should need because in the event that the market goes sideways, that ten percent will rise dramatically and hold you over until the bull market returns.
Remember, I am not a financial advisor but just have history, logic, and evidence based information to offer. Please let me know your thoughts by commenting. Also know that there are moments where silver when timed could perform well just as any single stock timed can do. The problem is the likelihood of individuals timing the marking consistently is extremely rare.
