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Is Investing in Silver a Good Idea?

Is Investing in Silver a Good Idea?

Is Investing in Silver a Good Idea?

 Is investing in silver a good idea? Well, silver investing or  silver-based investing, such as exchange traded funds (ETFs), is risky. Just like other precious metals, silver is vulnerable to inflation, and it can lose all of its value. Silver prices actually stayed very low for most of the past thirty years.

If you look at a historical silver price chart you will see that the cost of a troy ounce of silver stayed under $9 from January 1985 to December 2006. At a number of points, silver prices actually fell as low as $5. It is true that silver prices rose to over $40 an ounce in 2010 but then fell to around $27, they are now around $20 an ounce.

The charts tell a very different story than the one the silver salesmen are currently spreading. Just like gold, silver can lose all or most of its value and sit at a very low price for very long periods of time.

Inflation vs. Silver

A person who bought $1,000 worth of silver in 1990 and held it until to 2000 would have seen little or no return on that investment. If the same person had purchased $1,000 worth of an S&P 500 indexed fund, he or she would have earned around 14.7% a year on their investment.

Silver buyers would have also lost $317.52 to inflation in that decade. According to the U.S. Bureau of Labor Statistics’ inflation calculator, $1,000 in 1990 had the same buying power as $1,317.52 in 2000. A successful investment must beat inflation, and silver, like gold, usually does not beat inflation.

The silver investor actually lost even more money because they would have had no investment gain to compound. That means the amount in their account would have decreased. The S&P investor would have been able to compound gains and grow a nest egg.

As you can see, silver is not something you should put your nest egg in or use as a retirement investment. The gains can be minimal at best, and the bottom can drop out of the silver market just as fast as the stock market. To make matters worse, it can take years or decades for the silver market to recover. The stock market historically recovers from losses within five or ten years.

The sorry truth is that the silver investor would have been better putting money in a plain savings account.

Is Investing in Silver a Good Idea?

Is Investing in Silver a Good Idea?

Physical silver investing, such as silver coins or silver bars, can be an worse idea than buying into a silver fund. If you buy silver coins or silver  bars, you’ll need someplace to store them. You’ll either have to get a safe deposit box or put a safe in your home.

If you store silver coins in your home, you’ll have to pay more for insurance because most homeowners’ and renters’ insurance policies specifically exclude coverage on high value items like coins. You will have to buy special coverage for those items in the form of a rider.

Getting a good price for silver coins or silver bars can also be difficult. If you have to sell them quickly, you’ll have to go to the pawn shop. The pawnbroker will usually pay you about half of what the coins are worth.

The truth is that, unless you are a serious commodities trader, silver investing is not a good idea. The lesson here is clear: Always research the history of an investment before putting money into it. The actual history often tells a very different story than the one you’re hearing from the salespeople.


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