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Investing in precious metals

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Investing in precious metals

Postby perlick29 » Wed May 04, 2011 10:42 am

I've been trying to figure out if this is a good idea, specifically silver. My fiancee has been really pushing me to invest our savings money in silver, since her brother does, and according to all the stuff he watches/reads, this is a safe investment for the future since the American dollar could very well collapse further in the near future. I'm not looking to turn this into a political discussion at all, I'm simply trying to see if anyone is capable of helping me understand the benefits/drawbacks.

I was advised to dump out of my 401k and invest in silver, I'd really rather not do that but apparently the economy is headed for a very steep decline. Any thoughts on this subject would be appreciated, and again I'm not trying to spark a political debate.
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Re: Investing in precious metals

Postby lastingsgriller » Wed May 04, 2011 11:19 am

you probably have a pretty big fee associated with taking your money out of your 401K.. possibly high enough to offest any short-term gaines you might make by investing it in any precious metal..

but.. most likely right now your company is not contrubing to your 401K and probably won't be for quite a while.

when re-investing, I can't possibly stress the importance of diverifying enough. DO NOT simply take all of you money out of you 401k and invest it all in siver or all precious metals.
silver and gold have been nice recently and made some nice gains. additionaly, they are quite safe. but i assure you that at some point in the future those gains will be offset by some losses. when? who knows? how much? who know? but, thats why we diversify.

I don't know how deeply we want to get into investment strategies here.. but the first thing you have to do is find out all information about your 401k. how much does it cost you to get out of it? is your company contibuting to it? how long has it been since your company contributed? what is the likelyhood that your company will be contributing in the near future?

once you find that out, if you decide that it's best to move your money, then it's time to look at your strategy.

questions to ask yourself? how important is this money to you? that is an honest question. if you take a large loss on this money will it be a serious detriment to you and your family? that answer to that question will be the basis of your investment strategy. if you can afford to take a loss then you may want to look into something that has more risk/reward. if you can't afford any loss then something safe like T-Bills. age also factors into this, obviously the younger you are, the more risk you can take.

anyways.. I don't mean to ramble. if you are comfortable talking about this stuff here, we can keep it in the thread. If you want to PM me, I'm happy to help out.
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Re: Investing in precious metals

Postby perlick29 » Wed May 04, 2011 12:02 pm

I don't mind keeping this public lastings. I'm 27 and have been working for WWE for close to 5 years, eligible for 401k for a shade under 4. As of right now WWE still matches up to 3% if I put up at least 6%, and since I'm young I've invested in an aggressive FID Freedom 2050 plan. I'm not even eligible to take the whole sum out at this time but if I was I'd be paying 20% now and then an additional 10% at the end of the fiscal year, plus the option to have New York State taxes taken out.

The penalty is steep and I don't think I'm looking to withdraw especially since I'm under 35 years old. If there any strategies in investing some of my savings into precious metals that's a good topic of discussion, as well as other options with which to diversify. Our companies stock dividend was cut by 67% recently so we've been getting hit hard in the market, but fortunately at my job title I haven't been given any stock options and most likely will not invest in them any time soon.
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Re: Investing in precious metals

Postby RugbyD » Wed May 04, 2011 1:14 pm

Do not take any money out of tax-deferred accounts unless you have no other option to support your daily cash flow. The tax hit is not worth it unless you're converting to a Roth IRA for tax purposes.

5-10% of your net worth in precious metals is a good allocation. You can go more if you really have a strong reason to think its a good idea. I prefer gold as it is more stable than silver and less of an industrial metal. Just look at how much it's tanking right now.

Safe is a relative term. Look at the historical prices of precious metals and decide how 'safe' they really look. That said, I am of the mind that currencies, especially the USD, will continue to be devalued and inflation is worse than the official numbers. This makes precious metals a good hedge within reason.

At this point both have had a big run-up over several years so you may have missed the so-called easy money. Don't go all-in on any investment. Stay diverse with an aggressive overall risk allocation. Take a good look at ETFs that hold floating rate debt.
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Re: Investing in precious metals

Postby lastingsgriller » Wed May 04, 2011 1:58 pm

RugbyD wrote:Do not take any money out of tax-deferred accounts unless you have no other option to support your daily cash flow. The tax hit is not worth it unless you're converting to a Roth IRA for tax purposes.

5-10% of your net worth in precious metals is a good allocation. You can go more if you really have a strong reason to think its a good idea. I prefer gold as it is more stable than silver and less of an industrial metal. Just look at how much it's tanking right now.

Safe is a relative term. Look at the historical prices of precious metals and decide how 'safe' they really look. That said, I am of the mind that currencies, especially the USD, will continue to be devalued and inflation is worse than the official numbers. This makes precious metals a good hedge within reason.

At this point both have had a big run-up over several years so you may have missed the so-called easy money. Don't go all-in on any investment. Stay diverse with an aggressive overall risk allocation. Take a good look at ETFs that hold floating rate debt.



all of this. +1

A good rule of thumb for a moderately aggressive portfolio would be to invest about 60% in stocks, 35% in bonds and kept 5% cash in the bank.

If you want to add precious metals to the mix, i think of them as safer than your stock and more aggressive than your bonds. (that of course is dependant on the stocks you are invested in.)
I don't think you want any more that 15% of your investments in precious metals and I would say adding precious metals should take from stock while keeping a healthy chunk in nice safe bonds.

gold hasn't really had any losses since the early 80's and has enjoyed pretty steady growth since the turn of the century. silver on the other hand is a bit more volitle and is currently in the middle of an insane spike since '08.

There are a couple of schools of thought regarding silver.. one is to get on board and ride the wave, but it's something you'll want to keep a close eye on and get out before it comes crashing back down. This is only my opinion, but I don't have alot of intrest in these kinds of investments. Silver, right now, is worth over 5x was it was in 2007. This reaks of unsustainable growth and due to regress. Might be something to play around with if you are an active trader, but I personally am more of a set it and forget it type of guy.
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Re: Investing in precious metals

Postby AussieDodger » Wed May 04, 2011 3:22 pm

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Re: Investing in precious metals

Postby StlSluggers » Wed May 04, 2011 3:27 pm

For what it's worth, the time to buy metals may have passed.

Soros sells gold, silver investments: report
Hedge-fund giant sold much of its gold, silver over the past month

SAN FRANCISCO (MarketWatch) — George Soros’s Soros Fund Management, one of the biggest hedge-fund firms in the world, sold much of its gold and silver investments over the past month because there’s less chance of deflation, The Wall Street Journal reported Wednesday.

The move is a sign that precious metals may be losing some of their appeal with top investors after a big rally in recent years.

Wall Street Journal’s Liz Rappaport has details about the $1 billion suit brought by the U.S. government against Deutsche Bank. The bank is accused of dishonesty regarding mortgage loans.

Soros Fund Management, a $28 billion firm now run by Keith Anderson, bought gold to protect against deflation. It now believes there’s less risk of a sustained drop in consumer prices because the Federal Reserve is still pumping money into the financial system, the Journal reported, citing unidentified people familiar with Anderson’s thinking.

Soros Fund Management isn’t too worried about a surge in inflation because the Fed may signal at the end of 2011 that interest-rate increases are coming — possibly early in 2012, the newspaper said.

Gold prices have fallen in recent days and silver has slumped, after a ferocious rally in the past year and a half.
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Re: Investing in precious metals

Postby Neato Torpedo » Wed May 04, 2011 3:51 pm

The price of gold falls right when Glenn Beck is fired....hmmm....coincidence???!!
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Re: Investing in precious metals

Postby perlick29 » Wed May 04, 2011 3:54 pm

StlSluggers wrote:For what it's worth, the time to buy metals may have passed.

Soros sells gold, silver investments: report
Hedge-fund giant sold much of its gold, silver over the past month

SAN FRANCISCO (MarketWatch) — George Soros’s Soros Fund Management, one of the biggest hedge-fund firms in the world, sold much of its gold and silver investments over the past month because there’s less chance of deflation, The Wall Street Journal reported Wednesday.

The move is a sign that precious metals may be losing some of their appeal with top investors after a big rally in recent years.

Wall Street Journal’s Liz Rappaport has details about the $1 billion suit brought by the U.S. government against Deutsche Bank. The bank is accused of dishonesty regarding mortgage loans.

Soros Fund Management, a $28 billion firm now run by Keith Anderson, bought gold to protect against deflation. It now believes there’s less risk of a sustained drop in consumer prices because the Federal Reserve is still pumping money into the financial system, the Journal reported, citing unidentified people familiar with Anderson’s thinking.

Soros Fund Management isn’t too worried about a surge in inflation because the Fed may signal at the end of 2011 that interest-rate increases are coming — possibly early in 2012, the newspaper said.

Gold prices have fallen in recent days and silver has slumped, after a ferocious rally in the past year and a half.


Interesting article. I didn't realize silver was so volatile over the last few years. It seems like a rather big gamble to invest strongly into it. Since you guys mentioned safer bonds, what kinds are we talking about?

Also, "Take a good look at ETFs that hold floating rate debt." I'm not exactly sure what this means, could someone give me some clarification?
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Re: Investing in precious metals

Postby RugbyD » Wed May 04, 2011 4:50 pm

perlick29 wrote:Also, "Take a good look at ETFs that hold floating rate debt." I'm not exactly sure what this means, could someone give me some clarification?


Fixed-rate bonds, especially high yield bonds, take a beating price-wise in a rising interest rate environment. Floating-rate debt's interest payments are tied to some spread above a moving benchmark rate like Prime or LIBOR, and therefore a well-insulated against rising rates and actually benefit from them. Given that rates are likely to rise within the next year, fixed-rate bond portfolios are at risk of losing value. Rates can't really go down either, so a way to gain exposure to bonds without being too exposed to rising rates is to invest in floating-rate funds.
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