The Best Investment For This Decade
Disclaimer: The information I present to you should only be used as a guidance. It should not be used to make any investment decision of any kind and I strongly suggest that you practice due diligence before buying and selling your investment. I will not be held responsible for any mistake and wrongdoing on your part.
In the last decade, the best investment of the decade was actually gold. While gold will continue to do well this decade, I believe another type of hard asset will outperform gold. I am talking about the poor man’s gold, which is silver. Silver will be the undisputed champion in this decade. People might say that China will be the best investment for this decade. Well, I believe China will be the best investment for this century! I believe silver will outperform China for the decade as well. But that is a different story for some other time. I will provide my thoughts on my reasons with supporting evidence and facts. First, I will provide background information on silver. Thereafter, I will discuss how you can profit from silver.
HISTORY OF SILVER
Silver is a commodity that is used for industrial and investment purposes. It was once used as a medium of exchange by the Mesopotamian merchants in 700 BC and it was mentioned in the US constitution to hold as a currency since the government would not allow “bills of credit”(paper fiat currency like the US dollar) to be used. Silver is a hard asset that requires a lot of effort and time to be minted. First, they mine the silver out of the ground, then they melted it into coins or bars. The bullion dealers buy the metal and customized them into American Eagle coins or other well known trademark. This is a lot of work! It does not take much time to create paper currency since all you need to do is turn on the printing press. This requires less time and effort. The “Silverbugs” claim that the US dollars should be backed by silver since it is sound money and it will prevent inflation. This statement requires further analysis that I will go into detail on my blog one day.
Today, silver is used to produce many electronic products such as flat screen television, laptops, cell phones, cameras, and others. It is the best thermal and electrical conductor in the world. It is claimed to be better than copper. Silver can also be stored as a hedge against inflation like gold and crude oil since it is a commodity. This explain the surge in demand for gold and silver coins. Right now, we have a deficit consumption with silver. There is more silver being consumed than produced according to silver expert, Ted Butler. Today, we have the lowest inventory of silver since 1300 AD. As humans continue to consume more flat screen televisions, computers, laptop, and cameras, the inventory will continue to decrease. The Earth does not hold enough silver that will last forever. It is estimated that we will have zero to one billion ounces of silver above ground inventory by 2030! This reason alone will make silver the BEST INVESTMENT THIS DECADE.
INVESTMENT DEMAND
The demand for silver is increasing every year. In 2009, silver demand was 209.7 million ounces and the CPM Group projects an increase in 2010 to 213.7 million ounces. The unstable market and rising debt causes investors to flee to one of the few bull market available. Investors do not believe the stock market is a safer haven then silver and gold and the expansion in the money supply could cause inflation so they buy the hard asset since it has more value than paper investment and it is certain to rise. The dying Euro will help silver price increase even more in the future. If you don’t believe me, then ask yourself why silver jump from below $18 per oz to nearly $20 oz in just two week after Euro bailout was announced? After the European Union and IMF announced the $1 trillion bailout for the Euro countries, the investors fled the market and brought silver in anticipation of inflation. I believe silver will go above $25 by the end of 2010., but 2011 will be a big year for silver.
INDUSTRIAL DEMAND
The overall supply for silver is 826.1 million ounces for 2009. The overall demand for silver in 2009 was 616.4 million ounces and it includes investment and industrial demand. You can tell the supply and demand is not too far apart. As I sta
ted earlier, ” It is estimated that we will have zero to one billion ounces of silver above ground inventory by 2030!” The supply is getting scarce year after year as the industrial demand increases. For instance, solar panel contain a small amount of silver, but the demand for the panel is increasing so more silver is needed to make it. The same can be applied to electronics such as flat screen televisions and cameras. As I said earlier, “As humans continue to consume more flat screen televisions, computers, laptop, and cameras, the inventory will continue to decrease.” The increase in demand and decrease in supply will ultimately increase the price of silver. I have no doubt about it!
HOW CAN YOU PROFIT FROM SILVER?
People would ask, how would silver help their portfolio? As I mentioned before, it provides a great hedge against inflation and it is a valuable asset to store because of the value and it could be accepted as a currency in the future now that most fiat currencies are unstable. There is two ways you can profit from the best investment for this decade.
- BULLIONS: The safest way to invest in silver is to buy physical silver such as American Eagle coins and 99.9% pure silver bars. The bars come in many different sizes ranging from one ounce to 1,000 ounce. An investor and great friend of mine think people should open their personal saving account by buying physical silver instead of putting your money in a saving account. This will prevent your savings from losing value because of inflation and the return is greater than a saving account. Currently (June 2010), silver has a rate of return of 20.57 percent. Find me a saving account with those rate and I will jump off a cliff (not really). Anyways, you should include physical silver in your investment because it will provide solid return every year.
- SILVER STOCKS: Silver stocks are very attractive nowadays, especiallythe silver mining stock. It provide more leverage than owning physical silver so the returns are greater if you find a quality mining company with a great business model and good management. Please read Jason Burack’s article regarding commodity stocks before going further. It is a must read. However, since silver stock provide more leverage, it does carry more risk because the downside is great. If the business fails, then your investment will falter. Physical silver does not carry downside risk because it will never go to zero. I believe good silver stocks will play very well this decade because the demand for silver is high and it is a good hedge. The miner keep their silver in reserves so when the silver price goes up, their value increases along with their income. I own many quality silver stocks so I am putting my money where my mouth is so I recommend that you look into it. If you do not want to take the risk in owning silver stocks, then I recommend silver mutual fund and ETFs as a substitute. The returns is not as great as owning individual stocks, but you will get solid returns every year. This is good if you are retired or if you are close to retirement. However, do your homework on these mutual fund/ETFs because a lot of them are dishonest about their daily operation such as GLD and SLV. These ETF do not allow auditor into their vault which is a red flag because they might not have anything in their vault and investors would not know about it! I would recommend CEF and PHYS to any investors. Both stock are managed by good and honest company.
I hope this article encourages you to look into owning physical silver bullion and silver stocks in your portfolio. Here’s more article about silver. Good night and good luck!
Disclaimer: The information I present to you should only be used as a guidance. It should not be used to make any investment decision of any kind and I strongly suggest that you practice due diligence before buying and selling your investment. I will not be held responsible for any mistake and wrongdoing on your part.
