Saturday, November 5, 2016

Stack silver when it's cheap, to buy a true rarity later

This will be quick. Just an idea I had to slowly grow your money by stacking silver with the intent of purchasing more expensive coins.

I'm assuming everyone has a vague idea what market bubbles are. The worst in recent history was the housing market bubble that popped and caused the crash of 2008. Remember? The crash that caused metal prices to skyrocket? Silver topped out at about $47 per ounce and gold peaked up around $1,800 per ounce.

Prices have settled to more stable level. I say "stable" meaning not going completely bonkers; there will always be fluctuations. Anyway, now that prices have normalized, it is a good time to buy bulk silver. Don't go insane and spend your rent money or mortgage payment, but what if you took $50 per month and put it into silver? That's $600 a year. Since the price fluctuates, it is difficult to predict how much silver that would actually yield. The rule of thumb would be to buy silver at this rate, or whatever rate you can afford, for as long as it is valued under $20 per ounce. (Please note - the $20 rule may need to be adjusted in coming years as the dollar continues to lose value.)

Large market bubbles don't happen very often, every couple decades or so. Assuming silver averaged about $22.50 per ounce the entire time you were investing (because this would be an investment), and the next market bubble pops twenty years from now, you would be sitting on approximately 530 ounces of silver. If you sold at $40 per ounce, you would be looking at $21,000 (for having invested $12,000).

|NOTE: I do not know what kind of tax implications there would be when the silver was sold or traded twenty years from now. That will always have to be taken into account.|

The interesting thing is the rare coins' values do not always increase with metals prices. For instance, a 1909-S VDB graded MS-65 RD would have cost around $6,750 at the beginning of 2006, when silver values were lower, but the same coin would have cost about $6,500 when silver hit its peak in April 2011.

How cool would it have been to have put $50 per month into silver when it was hovering between $9 - $18 per ounce for the 4+ years (about 54 months) before it took off (an investment of $2,700); accumulated about 200 ounces; cashed out between $35 - $40 per ounce, and had $7,000 - $8,000 to show for it? That MS-65 RD 1909-S VDB cent could have been yours! Or mine! Or whoever had done the plan outlined above!

Something to think about.


Tim Stroud said...

Excellent article! Back in the day before everyone was roll searching, I was doing just what was described, but my stack was bought at mostly face value. I wound up selling off the beat up 1964 and 40% Kennedy's along with a few worn slick Walker's for a hefty profit when silver was around $35 an ounce. I never thought that it would go over $40 even with all the soothsayers touting $100+ an once. Used some of that money to buy a few very nice graded Morgans that have held their value pretty well since then.

Unknown said...

Excellent idea! I bought lots of British gold sovereigns in the 1990s when there weren't many US gold coins, and gold was $350 and ounce, and when gold was $1000+ I traded them for Gold Eagle Proof sets. It was like getting the proof sets for 35 cents on the dollar!