Don’t keep all of your money in dollars. The dollar, over time, loses value. Ever since the creation of the Federal Reserve, that has been the case. So if you store it around the house in cash and never spend a cent, your money will decrease in value due to inflation.
So what are you supposed to do? Well, they can print unlimited amounts of dollars, but they can’t print gold, silver, or other precious metals. And metals, such as gold and silver, have actual uses. And while we don’t know what the miners will turn up, we know that there is a limited supply of these materials on earth.
Yes, the value of the metals will go up and down. I cannot tell you what gold or silver will be worth a year from now. But, over time, the prices have generally gone up. Silver is more volatile, but that just presents more opportunities to make money.
Be careful about a few things. First, if you don’t buy from the right source or if you don’t know what you are doing, you might end up buying gold-clad or silver-clad bars and coins. Run away from anything “clad”. They are essentially worthless. If you search on Ebay for silver bars, you will find lots of people selling silver clad bars to people who don’t know any better. I wish that Ebay would shut down these people or put them in a separate “suckers” category or something. Some person might think she is getting a good deal on a silver bar and end up getting taking advantage of. Also, be just as careful of people selling “German Silver” bars. They appear cheaper than the regular silver bars, but what you are buying isn’t silver. And while “German Silver” may have some industrial uses, chances are you are overpaying for something that most people don’t want. And don’t think you are doing yourself any favors by spending more on bars with fancy designs. Silver is silver and when you go to sell no one is going to pay you more because your bar has a cool design or logo on it. It is made to be melted down and reused. Also, be careful of people who are selling with a high markup or who are screwing you with shipping expenses. Know the spot price. If you are spending much more than $3 per ounce of silver you are spending too much.
You should invest in both silver and gold and other precious metals, but I prefer silver. When the broader population starts to see the advantages of metal investing, I believe that most will start in silver. The retail investor doesn’t start out with a lot of money. And buying a few one ounce silver bars to start with is going to be an easier way to get started than buying one ounce of gold. So, my personal opinion is that silver will see more upswings over the next couple of years.
Where should you buy your silver? Personally, I like buying from Silvertowne.com. They have reasonable prices and usually have free shipping deals. Right now internet sales are still free of sales taxes in most places so you have that advantage too. I’m not getting anything to write this, but they are the first place I go to buy gold and silver. Their basic silver bars are all that you need. Again, don’t pay extra for fancy designs. If you buy a five or ten or even hundred ounce bar you get a small discount on the price.
You can also buy silver from a local coin dealer. You save on shipping and can support a local business. But you may be taxed on the purchase. Always ask how much over spot they are charging per ounce and go in knowing the spot price. In my experience, some small coin stores are very honest and ethical, but a few try to rip off people who don’t know any better by charging absurd prices. Don’t do business with those people.
You are buying silver and gold with the intention of selling it when it goes up in value. You can then use the cash to pay your bills and expenses. Of course, the government wants a big cut, currently 28% of your profit. That doesn’t strike me as fair or right, but what can you do? I don’t recommend dodging your taxes. However, my understanding is that sales are not reported to the IRS unless they pass over a certain threshold. I would keep any transaction under $600. So what does this mean for your buying habits? I would buy gold in amounts smaller than one ounce. Maybe stick to 1/10th of an ounce coins. As for silver, I would buy one ounce or five ounce bars. If silver shoots to $100 an ounce for some reason, then you can still sell your bars or rounds and avoid the extra attention. I would also space out the sales and drive around to different stores all over your region to avoid giving the impression to any one dealer that you are cashing in large amounts so that they don’t have to file a report with the Treasury Department. They are required to report “suspicious activity”. In addition, you may also sell to friends and family members, informally and for cash. And you can also sell at flea markets where you can often get a table for about $20 cash. If you sell to dealer, you will generally sell at $3 or so under spot, which is standard, but if you sell to others at the spot price, both you and your buyer will benefit. Of course, it is still your obligation to pay any and all taxes. My suggestion about moving around to sell is solely for the purpose of saving small business people the hassle of filling out government forms, but does not relieve you of your responsibilities.
Take the same advice about hiding your money from burglars and apply it here. You don’t want to save large amounts of gold or silver and have some burglar steal your investments. Hide it well.
Follow the market and watch for trends. If you are smart and lucky, you will do very well. Even if you aren’t, it is likely still better than just keeping your money in dollars.
