Which is better? Silver or ?

[clovis97]

Please don't shoot me for asking dumb questions. I am just trying to learn...

I am really behind on retirement savings, and am doing my best to catch up.

This is sometimes a little difficult due to our income, the nature of our business, the economy, and my health.

I am very bullish on physical silver, and I like high yield dividend stocks of solid companies. Most of what we put back for retirement is invested in those high yield dividend stocks. (LLY, T, MO, BPT, AEP. etc.) We don't have much saved, BTW, so please don't think I am a high roller!!

My weekly investments are small. Most people would laugh at our meager amounts, but they are starting to add up. Sometimes, my deposits into my Scottrade account are embarrassingly small!

Sometimes, I score some extra money during the week. Last week, for instance, I unexpectedly sold an item to my cousin for $30.

I told my wife that I wanted to buy junk silver coinage with the extra $30. At today's prices, I could buy about an ounce of silver, roughly speaking. She thinks we should put the money in our retirement account and buy high yielding stocks with it. (I only buy stock when I get enough saved up in the account.)

I firmly believe that silver is going to go up in price, even drastically, given time. I like that it is a hedge against inflation too. Again, let me stress that I like owning physical silver!!!!

Here is what I am wondering: If I have a $30 stock paying a 5% yield, how would that compare to silver if it doubled in value from $30 to $60 an ounce? How about $100 an ounce?

How long do I have to hold the $30 stock that yields 5% to beat a silver investment when it hits $60?

I am not looking for pro and con arguments about paper silver, EOTWAWKI, the stock market, gold, etc....I am just looking to learn the basic math and how to figure which investment might be better with returns.

Thank you!!!!!! I appreciate you helping this dumb guy out!!!!

 

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[jim4silver]

Although I personally don't own any stocks anymore, there are many, even in the silver bug pundit community, who believe that the stock market will go up along with PMs if we wind up in a high inflation or even hyperinflation environment. Much like how it is sometimes said that the reason stocks are up as much as they are now is partially related to all the quantitative easing that has taken place over the last couple of years.

However, my opinion is that the commonly recommended 5 to 10% of one's money should be invested into PMs is too small of an amount at this point in time while we are still arguably in the midst of a PM bull market that has further to go. But I have probably put too much into PMs percentage wise, so I cannot recommend what percentage is the best. One thing I have learned is a person needs to have some cash in the bank so that you don't have to sell PMs or stocks, etc, if the need arises to pay unexpected bills or expenses.

In today's world a person should also have water, food and other important items on hand in case some unforeseen emergency situation arises where having such things would be more important than PMs or money. Having such items stored at home does not cost much compared to the price of an ounce of gold or roll of silver eagles. People often say they will use their junk silver to "barter" for things they need like food and water, but I believe if such a situation happens where such things become scarce for a time, nobody is going to want to trade what they have, even for PMs.

I would not take anyone's advice on here or anywhere for that matter with respect to your own money. It sounds like you understand enough by your question that you will make the best choice once you evaluate all the options.

Jim

 

[mts]

Here is what I am wondering: If I have a $30 stock paying a 5% yield, how would that compare to silver if it doubled in value from $30 to $60 an ounce? How about $100 an ounce?

How long do I have to hold the $30 stock that yields 5% to beat a silver investment when it hits $60?

A $30 stock paying a 5% yield will double in value after about 14 years. The calculation of this is not too difficult if you have a scientific calculator that can handle logarithms. There are also financial calculators that have this equation built in. But it is actually easier to just use one of the freely available online compound interest calculators. Google for online compound interest calculator to find examples.

 

[clovis97]

Thank you for the replies!!!!!!

Your replies are helping me understand where I am at, and helping me to decide how much to put into PM's, percentage wise.

I want to buy more silver, but it is hard because we coin roll hunt. When you can pick up some silver at face, it sure is hard to walk into a coin shop and plunk down cash to buy silver.

Again, thank you!!!!

 

[trdhrdr007]

Here's a little trick my Dad showed me a long time ago. It's a quick formula that will help when you are evaluating investments. He called it the rule of 72. Here's the formula:

T x I = 72, where T is the length of time it will take to double your investment & I is the interest rate. You can solve for T or I with these equations:
T = 72/I I = 72/T

You can run it either direction. If you want to double your money in 10 years you will need to get 7.2% interest(72/10). If you are getting 10% interest it will take 7.2 years to double your money(72/10). The result is not exact but it's darn close. If your Interest rate starts to get over 20% it becomes less accurate.

 

[clovis97]

Thank you, 007.

Any chance you could plug some numbers into those equations? Especially the 5% yield/return on my $30 stock?

I know...I know...I am pretty dumb. It has been a hard life being as dumb as I am!

 

[trdhrdr007]

I'm going to have to make a couple assumptions. The first is that the price of the stock stays at $30. The second is that the 5% dividend is reinvested into the same stock as long as you hold it. In order for the formula to work all the proceeds must be re-invested with the same return. From there you just plug the numbers into the formula:

T = 72/I

T = 72/5

T = 14.4 (years to double your investment)

I don't know a better way to explain it. Here's a couple examples that might make it more clear:

A) You have an opportunity to invest at 16% & want to know how long it would take to double your money.
T = 72/I T = 72/16 T = 4.5 years

B) Someone tells you that an investment will double your money in 6 years & you want to know what your rate of return(interest) is.
I = 72/T I = 72/6 I = 12%

 

[clovis97]

Thank you, 007!!!

That is just what I needed!!!! Thank you so much!!!!