Tuesday, March 5, 2013

What if I’m Wrong about Silver?

Lately, I’ve been hot on investing in silver. I think it’s a good time for buying physical silver and have purchased some myself. So while I’m backing up my words with action, what if both my words and actions are wrong and silver isn’t the investment vehicle I think it is or will be?

Well, it’s a good question to consider, and a question that really should be asked of just about any type of investment. Here are a few of my answers to just such a question and steps I’ve taken in the process of hedging against the possibility of my being wrong about silver.

Asset Diversification
So what if I’m wrong about silver? Well, then I’ve diversified my investment portfolio just a little bit more and have taken on some risk in another area. Some people stick largely to the stock market and prefer to spread risk among areas of the same sort of investment -- stocks. However, I’m a believer that expanding into areas such as physical assets can help hedge against a stock market collapse. And while few investments are ever guaranteed, even if silver falters, I find it hard to believe that it won’t eventually appreciate beyond its current value over the long-term.

Investing for the Long-term
Speaking of the long-term, so what if silver goes down in the near-term? I often hear investment analysts and advisors talk about being in the stock market for “the long haul” yet it seems like most of the Wall Street money-makers are getting in and out of the market quickly to make their big bucks lately. So how is it that we regular investors are supposed to make a killing in the stock market over the long haul?

I just don’t think that the stock market is the place to be for long-term investments anymore -- too many bubbles popping for my likes. However, I feel that metals such as silver and gold have the ability to appreciate over the long-term due not only to current economic policies but their ability to be used both in financial and industrial applications. And if nothing else, I can always hand silver down to the kids as an investment for them if I can’t make a go of it during my lifetime.

Portfolio Amounts
Currently, physical silver makes up a very minor part of my investment portfolio. Eventually, over time, I’d like to increase the role silver plays among my investments. I feel that by doing so, I can take some of the weight off of other areas. As I mentioned previously, this can help me diversify, and it can help spread risk out over not only different risk levels but different types of assets as well.

While I have money in the stock market, it’s nice to own something physical as well. And if silver goes down in price, it goes down. However, whether my managed stock funds go up or down, their amounts continue to be whittled away by management fees and charges. This can mean that spreading my portfolio amounts out over a variety of types of investments when it comes to risk, type, fee and tax level, and similar characteristics gives my portfolio the ability to bend and give with a variety of economic conditions no matter what they are.

Protecting at Least Some of My Investment
So let’s say that I buy a roll of 1964 US quarters. These Washington quarters were at that time produced with 90 percent silver content. And let’s also say that I’m the worst investment picker of all time and silver becomes absolutely worthless. Even if that happens, that roll of quarter will still be worth its face value of $10. While it might be of slight consolation considering that I would likely have paid much more for those quarters initially, at least it’s a partial protection of my investment. And of course, there is always the numismatic (collector’s) value of such coins, which, while maybe not as high as the silver content value I'd hoped for, may be much higher than the actual face value of the coin.

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