Question about silver investment.

magazineman · January 8, 2012 12:28PM

A friend of mine wants to diversify his investments a bit. He has a 10K cd up for renewal Feb. 7th. He's only making .9% on it. He would like to invest that 10K in silver. What would be the best thing for him to do to get as much silver as close to spot price as possible? I know there is a premium over spot no matter what, but what is the best route to take to minimize that? All opinions valued. Thanks

jmski52 · January 8, 2012 12:34PM

Getting silver as close to spot as possible may, or may not be the best strategy. He should consider liquidity as well, and the spread also. These things keep changing with the market, so he should be advised to start pricing various options and to ask questions along the way.

If it were me, I would go with either Silver Eagles or Silver Maples. Fungible. Easy to price, track & liquidate. Not the lowest premiums, but you always know where you stand.

GRANDAM · January 8, 2012 12:45PM

90% Silver Coin is always nice

GrandAm

ModernCoin · January 8, 2012 2:26PM

To tell you where to put his money we would need much more information. If the 10K represents a significant amount of his net worth, than silver probably isn't right for him. If he may need to sell it in the next year or two, than silver isn't right for him. Having said that though if he wants to go with silver than I would take him to a local show and buy the cheapest silver possible. A mix of 90%, ASEs, and generic silver sounds good to me.

Pokermandude · January 8, 2012 3:02PM

I'd also agree with a mix of sizes and purities. Assuming he lives in the USA, I'd do about a 2:1 ratio of .999 silver of various types and 90% junk silver.

I'd also take into account his age/how close he is to retirement. Older people should be more inclined to be heavier on gold/lighter on silver for their portfolios.

OPA · January 8, 2012 9:13PM

With the volatility in silver, I would consider "investing" in bullion products that carry a build in numismatic value such as: Canadian Wolf & Bear... Australian Kooks .... Chinese Panda's..... Mexican proof 2 & 5 Libertads, just to name a few. Look for historically relatively low mintage items where there is a decent demand in the secondary market. A little research away from US bullion products should give you an idea. "Let eBay be your guide."

derryb · January 8, 2012 10:19PM

I would advise him to first be convinced silver has reached a near term bottom. I am not sure that it has. He might be better off buying at $31 spot knowing that silver has legs than to buy at $29 only to find out it hasn't bottomed. While long term still looks good, near term remains undecided. When the time is right, silver eagles are my weapon of choice.

cohodk · January 8, 2012 10:51PM

Oh boy. Going from an ultra conservative investement to a highly speculative one.

Justacommeman · January 8, 2012 11:00PM

<< Oh boy. Going from an ultra conservative investement to a highly speculative one. >>

No kidding. He could go from having $10,100 on February 7, 2012 guaranteed to having $5,000 or $15,000 in silver. I hope the friend knows that loss of principal is part of the deal or has a lot of time on his side not needing the money if silver falls epically. MJ

RedTiger · January 8, 2012 11:14PM

If the guy is new, I would definitely tell him to shop local first, and shop around. Do compare those prices to the big Internet and mail order dealers and see what the best local deals are relative to the competition. 90%, Eagles or Maples, big name 10 ounce bars are all good choices.

I would also break the purchase into at least two $5k chunks at least three months apart, to avoid a strong emotional attachment to any one silver price. Another post up the thread made some good points, that if he may need the money soon, silver might not be a good place. That if that $10k is a big part of what he has, silver might not be a good place for it.

A side story: There was a thread about a year ago about a guy wanting to put house down payment money into silver, that he would be buying his house in a about a year. Well, at the time of the thread, if my memory serves me, silver was about $35. Sure it ran up to $45, but I say 1% chance that the house buyer got out with a profit. It will be time to buy the house soon and at current levels, he is down about 20% and the vig (the dealer's cut). Most here told him it was a dumb idea. A lot of folks come to this forum and ask for advice and then go ahead and do what they were going to do no matter what folks tell them. Another unfortunate pattern is asking for advice, getting a lot of responses and then taking the worst advice offered on the thread.

Final point, be wary of giving someone too much advice. If things turn out badly, the "friend" may blame you, even though the advice was sound. Foolish people tend to ignore good advice. It is their nature. Fools tend to follow stupid advice or do what they want to do which is act foolishly. Be prepared for that. You might give the best advice and the "friend" watches TV or listens to the radio and buys from Home Shopping Network or a telemarketer radio ad for triple the price of what a reasonable person might pay.

mariner67 · January 8, 2012 11:16PM

<< 

<< Oh boy. Going from an ultra conservative investement to a highly speculative one. >>

No kidding. He could go from having $10,100 on February 7, 2012 guaranteed to having $5,000 or $15,000 in silver. I hope the friend knows that loss of principal is part of the deal or has a lot of time on his side not needing the money if silver falls epically. MJ >>

Wow is right!
This extreme swing in investment strategy is what is most concerning.
You should be more closely examining that before moving forward into silver.
Great advise here.

magazineman · January 9, 2012 10:55AM

Here is some more background. He is 50 years old. Has his last child nearly through college. He has a great 401K that's at nearly 750K. The 10K CD is not a huge chunk of his worth and probably not that big of risk. He is somewhat of a "doomsdayer" and feels strongly that he needs a holding of silver. He has no interest in numismatics at all. My advice was to just buy bulk 90% at the best possible price. Long term holding is not a problem for him.

Justacommeman · January 9, 2012 11:30AM

<< Here is some more background. He is 50 years old. Has his last child nearly through college. He has a great 401K that's at nearly 750K. The 10K CD is not a huge chunk of his worth and probably not that big of risk. He is somewhat of a "doomsdayer" and feels strongly that he needs a holding of silver. He has no interest in numismatics at all. My advice was to just buy bulk 90% at the best possible price. Long term holding is not a problem for him. >>

He needs some physical silver and gold then

I would always start with gold before silver.

MJ

morgantype · January 9, 2012 11:55AM

Tell him to go 75k!

The 10k will only get about 500 face. (tongue in cheek)

Tell him to have fun! 10 k sounds reasonable!

Baley · January 9, 2012 12:33PM

He is somewhat of a "doomsdayer" and feels strongly that he needs a holding of silver.

so, he'll fit right in around here?

What would be the best thing for him to do to get as much silver as close to spot price as possible? I know there is a premium over spot no matter what, but what is the best route to take to minimize that?

1/3 10 oz bars, 1/3 ASEs, and 1/3 junk 90%, or half and half on two of those, or all in on one of them.

All are very liquid on the way back out.

You might be able to get a little more silver in other forms on the way in (because people are trying to unload it), but it will be tough to get back out of without discounting it

Usually you are better off paying a bit of premium for nice silver that someone will want to buy from you someday

roadrunner · January 9, 2012 1:28PM

<< I would advise him to first be convinced silver has reached a near term bottom. I am not sure that it has. He might be better off buying at $31 spot knowing that silver has legs than to buy at $29 only to find out it hasn't bottomed. While long term still looks good, near term remains undecided. When the time is right, silver eagles are my weapon of choice. >>

I agree. Safest thing from here is to buy in tranches with the mindset that silver could get a lot cheaper. Don't go all in at one price point. Buy the first tranche at the next major
weak point when doom and gloom is thick. That's obviously not right now but could be in late January to mid-Feb. when metals have typically made an intermediate bottom.

cohodk · January 9, 2012 10:49PM

<< Here is some more background. He is 50 years old. Has his last child nearly through college. He has a great 401K that's at nearly 750K. The 10K CD is not a huge chunk of his worth and probably not that big of risk. He is somewhat of a "doomsdayer" and feels strongly that he needs a holding of silver. He has no interest in numismatics at all. My advice was to just buy bulk 90% at the best possible price. Long term holding is not a problem for him. >>

Then buy, buy, buy!!!! Gold rather than silver though.

Yukoncornelius1 · January 10, 2012 12:34AM

<< Here is some more background. He is 50 years old. Has his last child nearly through college. He has a great 401K that's at nearly 750K. The 10K CD is not a huge chunk of his worth and probably not that big of risk. He is somewhat of a "doomsdayer" and feels strongly that he needs a holding of silver. He has no interest in numismatics at all. My advice was to just buy bulk 90% at the best possible price. Long term holding is not a problem for him. >>

He doesn't have any gold or silver which is a mistake. I would tell him to put half into 90% silver as it carries the least premium to melt (if he can get walkers, full rim barbers, full date SLQ's for the same price as regular junk silver that would be the way to go).
Then he should put the rest into name brand rounds or JM, Engelhard 1,5 or 10 oz. bars whatever has the smallest premium.

In fact if he has any other cd's paying paltry amounts of interest he should consider buying some gold and platinum along with some more silver with it as he is woefully underinvested in tangible asset's. I assume he might have some A or AA insured municipal bonds for interest income as many of these pay close to 5% instead of less than 1% plus you pay no federal income tax and if purchased in the state he lives in no state tax as well.

Question about silver investment.

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