For CD’s you should look at the best deals now to make a decision now. https://www.depositaccounts.com/savings/
Best 5 yr 3.47%, well above expected inflation pretax. Although it depends your tax bracket, but frankly people who’d make a big deal over whether to hold physical silver are probably in a low bracket. The maximum size of CD that’s FDIC insured in a single account is 250k, that's over a half ton of silver. IOW it's not practical to invest serious money in silver you hold yourself, as compared to gold (~80 times lighter for a given value). Also physical silver purchase is subject to sales tax in some US states (is in mine) which paper investments (precious metal or otherwise) are not, and capital gains are taxed (federal) as ordinary income not the more favorable capital gains rate on paper assets. But again I guess many people investing in physical silver are planning small $ purchases, not bothering the tax authorities by reporting anything, buying out of state if there’s sale tax, and counting on it being too small for the authorities to track it down.
It’s true that inflation is a reasonable estimate for the return of silver, pre tax. That’s what it happens to be pretty closely for the last 100 yrs. But picking different start and end points significantly different, highly unpredictable even over pretty long periods. IOW, assuming you don’t ‘know’ silver is set for above avg returns ‘because it’s low’, there’s lots more risk in the return of silver compared to a FDIC insured CD (basically no risk) for no more (probably less if you play it straight on taxes) expected return with silver.
Because when you need to get a spot on the last helicopter out of Saigon, you need gold coins to bribe the embassy guards.
Alternatively, dont wait for that last helicopter. Also, cops and soldiers who take bribes typically accept paper money.
So it has to be a situation where paper money is worthless due to economic collapse, but people still will trade you food for useless shiny rocks.
If you’re worried about hyperinflation then any sort of asset will protect you, not just shiny rocks. Also, when is that hyperinflation kicking in? Any time soon?
Besides aramageddon type scenario’s as just mentioned, with a fund you are paying for
-storage cost, which you might or might not explicitly pay for holding it yourself.
-overhead and profit of the ETF sponsor, which you obviously would not pay yourself
-minus fees the ETF can earn from third parties lending out the metal, which you probably would not earn yourself
That’s assuming a fund which holds physical metal, such funds do exist for silver. Many/most commodity ETF’s including some for precious metals don’t hold the physical commodity but rather go long commodity futures and invest the cash you give them in safe short term debt instruments. All else equal that comes out in the wash, the storage cost tends to be embedded in ‘contango’ (futures price higher than spot) of the futures prices. However a futures driven fund will charge you a quoted expense ratio then (typically) lose more money on contango. With a physical fund you just lose the quoted ER.
The biggest AFAIK physical silver ETF is SLV. Expense ratio 0.5%. That’s significant considering an underlying expected return of inflation flat (2-something %). Although as mentioned above, a fund also avoids sales tax and punitive capital gains tax treatment of holding physical silver without being a tax cheat. There are a few competitors which might have slightly lower expense ratio’s.
If you’re preparing your Armageddon get-away bag, I think gold and lead are the metals you should focus on, not silver. But I must have missed where OP told us he was buying silver as a hedge against Armageddon. Or do we jump on our Armageddon helicopters whenever metal prices rise while stocks have a 10% dip?
Banks do not offer safe boxes for free. If you store your physical silver under your bed for free, you are effectively self-insuring yourself from theft. Even though you’re not writing an actual insurance policy you must include that self-insurance in your net cost. Tell us how much crime there is in your neighborhood if you want to compute the premium. Or bury it on your land. It will be a race: Will the dogs dig it up exposing it to the neighbors? Or will you (or your heirs) forget where you buried it first?
The 0.5% expense is onerous, hunh? Tell us about buying and selling physical silver. Does the silver dealer waive his mark-up if you order a cappuccino?
(Rereading this, I’m afraid I almost seem sarcastic. But I admit it, I do find some of these threads flabbergasting, The price of metals sometimes does actually go up, you know, and since metal prices are poorly correlated with stocks they offer an excellent way to reduce net risk through diversification. But mention metal-buying at SDMB and the assumption is you’re some crazed conspiracy nut.)
If I thought silver prices were going to go up significantly in the next couple of years, I’d buy shares in Fresnillo, the world’s largest silver miner. They are currently trading on a much lower valuation than their average over the last 5 years). The shares have the potential to provide a positive return even if the silver price stays broadly flat. If it tanks, the shares probably will too. If it goes up, the shares could go up even more. But, I haven’t invested because I have no idea what the silver price is likely to do, and neither does anyone else. Plus there are external risks such as currency movements (most of Fresnillo’s costs are in Mexican pesos), industrial action, regulation, natural disaster, etc.
In general terms over my life I put off buying until it gets under $10 and I don’t buy much until under $7. Done fairly well using that as my rule of thumb.
I consider commodity trading to be equivalent to foreign-currency trading. Yes, you can make money from it, but there are significant risks. These markets are subject to huge, long shifts that can wipe out anyone, even governments. If you really want to enter these markets, find the lowest cost vehicles to invest and disinvest your money. And don’t put in any more money that what you can afford to lose.
Mainly that the correlation of their returns with equity returns is essentially zero, so including a small allocation to silver/gold typically reduces portfolio risk.
Precious metals equities have higher expected returns, but they are also much more strongly correlated with the stock market.
But at least there is often a reason a currency goes up or down based on how a country is doing. For precious metals even economists are often unable to come up with one of their infamous after-the-fact pulled-out-a-hat explanations.
Note for you apocalypse survivors: gold units to buy food are so tiny that accurately dividing a piece, weighing it and then passing it further on becomes a problem. A stack of silver dimes and half dollars is more in range for usable commerce.
Another way that it’s possible to meaningfully invest in silver and gold is if you’re a jeweler. In that case, you can buy them at commodity prices, and turn them into something that will sell for greater than commodity prices.
But even as a diversification for your overall portfolio, there are other investment vehicles which will provide a similar or greater hedge, while still having a positive expected value.
There have been cases of the ETF “selling” more metal than they physically have.
It is nearly impossible to physically get the gold/silver that you own.
You are paying for someone to make the trades for you AND store your gold for you.
Metals (like commodities) can be a reasonable part of an investment strategy. One of my retirement account mutual funds holds a small amount in metals. It holds more in T-bonds, and that’s only about 2% (it’s majority equities with most hedging coming from bonds of various types).
If you feel like gambling a bit, buy some metals. Worst you can do is lose some money. If I was interested into getting more into metals and mining, I’d probably look for a mutual fund that was mostly stocks and not try to buy metals directly. The top holding of the one I’m looking at as an example for this post is Pan American Silver. Of course, that fund is also quarter-end -3.5% for the year while the S&P 500 is +2.7% YTD. In 34 years it’s only averaging 3.4%. It peaked at $40 in the recession and it’s under $11 today.
Two economists were walking down the sidewalk. One looks down and says, “Hey, a $20 bill just lying there!” The other says, “Nah, if it were a real $20 bill someone would have picked it up already.”
I just did a check on one site’s silver prices since the OP. Went down about .$25/oz, hit bottom noon on the 1st. Back up a little over the starting point.
So a 1.7% change down and up in a few days. Hardly trivial but quite common.
Ask the Hunt Brothers. They managed to corner 1/3 OF ALL THE FREAKING SILVER IN THE WORLD and lost a half-billion dollars when everyone else decided it would be a great time to unload grandma’s 24-piece Sterling silver tableware set.
But I admit it, I do find some of these threads flabbergasting, The price of metals sometimes does actually go up, you know, and since metal prices are poorly correlated with stocks they offer an excellent way to reduce net risk through diversification. But mention metal-buying at SDMB and the assumption is you’re some crazed conspiracy nut.)
I’m glad someone else notes that faith in the Efficient Market Hypothesis is often a little overdone.