The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: firefergy on February 02, 2013, 07:50:23 AM
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Hello everyone, I am considering moving 5% of my assets into physical gold and silver. Do any of you practice this or are you using ETFs to get commodity exposure? To be honest I think all of the doomsday prepping mania is slowly creeping into my brain as well but it could be a solid investment anyway.
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I use both. I used Colorado Gold for my physical gold, crawlingroad.com has a list of reputable gold brokers if you want to look there. IAU for the ETF. I'm not sure about the silver.
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ETFs to speculate price swings, physical for buy and hold
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ETFs to speculate price swings, physical for buy and hold
+1
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I've also been thinking about adding a small precious metals allocation to my portfolio and have a few more questions:
1) Is there a good low-cost ETF or mutual fund that holds more than a single metal?
2) Is it true that the 28% collectible tax applies to ETFs and funds that hold physical metal?
3) Is there a compelling reason to hold physical bullion rather than using an ETF?
I'm looking to buy and hold and want to keep it simple like an index fund. As cool as it sounds to have a bunch of shiny metal in my hands, I'd rather have all my assets "in the cloud".
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Hello everyone, I am considering moving 5% of my assets into physical gold and silver. Do any of you practice this or are you using ETFs to get commodity exposure? To be honest I think all of the doomsday prepping mania is slowly creeping into my brain as well but it could be a solid investment anyway.
I would say 5% is the max a good, diversified portfolio should have in precious metals. Smart allocation, and good luck.
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3) Is there a compelling reason to hold physical bullion rather than using an ETF?
One of the primary reasons people invest in PM is the worry of an economic crash. Some people believe that in the near future the FIAT currency is going to crash and things will revert to barter/trade. And in the land of economic crash PM will be king.
******* This is what i remember from an article, don't take it as gospel. There is a lot of talk about banks over selling gold. For example to quote an article I read a while ago. This example is on a small scale imagine tons of gold instead of OZ. A bank has 100 oz of gold that is being held for Germany. The bank does not own this gold, it is simply holding it. The bank lends out peoples money so why not lend out gold as well? The bank sells gold (stocks/etfs I forget which) for this gold. So now I own Germany gold, and Germany owns its own gold. The math doesn't add up. *********
Another benefit of holding it physically is (while I don't recommend avoiding paying taxes) it is difficult for the IRS to keep track of what you own or sell. So you can fairly easily avoid paying taxes on any gains.
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One of the primary reasons people invest in PM is the worry of an economic crash. Some people believe that in the near future the FIAT currency is going to crash and things will revert to barter/trade. And in the land of economic crash PM will be king.
******* This is what i remember from an article, don't take it as gospel. There is a lot of talk about banks over selling gold. For example to quote an article I read a while ago. This example is on a small scale imagine tons of gold instead of OZ. A bank has 100 oz of gold that is being held for Germany. The bank does not own this gold, it is simply holding it. The bank lends out peoples money so why not lend out gold as well? The bank sells gold (stocks/etfs I forget which) for this gold. So now I own Germany gold, and Germany owns its own gold. The math doesn't add up. *********
Another benefit of holding it physically is (while I don't recommend avoiding paying taxes) it is difficult for the IRS to keep track of what you own or sell. So you can fairly easily avoid paying taxes on any gains.
For some reason, this whole subject tends to attract the tinfoil-helmetted lunatic fringe. I suppose if you plan on fleeing the country in the event of some sort of economic catastrophe you might want to have some physical precious metal stash on hand. Personally, I would rather have usable goods on hand, like food, water, ammunition, etc.
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One of the primary reasons people invest in PM is the worry of an economic crash. Some people believe that in the near future the FIAT currency is going to crash and things will revert to barter/trade. And in the land of economic crash PM will be king.
******* This is what i remember from an article, don't take it as gospel. There is a lot of talk about banks over selling gold. For example to quote an article I read a while ago. This example is on a small scale imagine tons of gold instead of OZ. A bank has 100 oz of gold that is being held for Germany. The bank does not own this gold, it is simply holding it. The bank lends out peoples money so why not lend out gold as well? The bank sells gold (stocks/etfs I forget which) for this gold. So now I own Germany gold, and Germany owns its own gold. The math doesn't add up. *********
Another benefit of holding it physically is (while I don't recommend avoiding paying taxes) it is difficult for the IRS to keep track of what you own or sell. So you can fairly easily avoid paying taxes on any gains.
For some reason, this whole subject tends to attract the tinfoil-helmetted lunatic fringe. I suppose if you plan on fleeing the country in the event of some sort of economic catastrophe you might want to have some physical precious metal stash on hand. Personally, I would rather have usable goods on hand, like food, water, ammunition, etc.
That's why you have all of them! Ever read the story Metro 2033? They used ammunition as money. How is that for inherent worth.
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One of the primary reasons people invest in PM is the worry of an economic crash. Some people believe that in the near future the FIAT currency is going to crash and things will revert to barter/trade. And in the land of economic crash PM will be king.
******* This is what i remember from an article, don't take it as gospel. There is a lot of talk about banks over selling gold. For example to quote an article I read a while ago. This example is on a small scale imagine tons of gold instead of OZ. A bank has 100 oz of gold that is being held for Germany. The bank does not own this gold, it is simply holding it. The bank lends out peoples money so why not lend out gold as well? The bank sells gold (stocks/etfs I forget which) for this gold. So now I own Germany gold, and Germany owns its own gold. The math doesn't add up. *********
Another benefit of holding it physically is (while I don't recommend avoiding paying taxes) it is difficult for the IRS to keep track of what you own or sell. So you can fairly easily avoid paying taxes on any gains.
For some reason, this whole subject tends to attract the tinfoil-helmetted lunatic fringe. I suppose if you plan on fleeing the country in the event of some sort of economic catastrophe you might want to have some physical precious metal stash on hand. Personally, I would rather have usable goods on hand, like food, water, ammunition, etc.
That's why you have all of them! Ever read the story Metro 2033? They used ammunition as money. How is that for inherent worth.
Meh, I buy the ammo because I will use it over time and if prices get high enough I sell/trade some of it. What exactly would I use gold for? Can't eat it, wipe my butt with it, etc.
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I'm no fan of PM investing, but as a doomsday currency there's some credibility to using gold. A good currency must be easily recognized/assessed and difficult to counterfeit. In the case of gold bullion it's assessed by weight, and I believe it's easy to learn how to distinguish gold from, say, brass or something gold plated. This may be why historically we've always considered gold to be valuable, even in eras when it had no practical use (before electronics).
Bullets, on the other hand, might be easier to counterfeit; you don't know if it's a good bullet loaded with powder until you destroy its utility (either by disassembling the shell or by firing it).
Check this out for an example of how Tide has become an underground currency in drug markets: https://www.schneier.com/blog/archives/2013/02/tide_becomes_dr.html
I'm curious, are you guys actually keeping physical precious metals in your house or a nearby bank's safety deposit box? How do you protect against theft, and have you done a comparative risk analysis of getting robbed vs. the economy crashing?
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Bullets, on the other hand, might be easier to counterfeit; you don't know if it's a good bullet loaded with powder until you destroy its utility (either by disassembling the shell or by firing it).
Ammo is actually really easy to check: just see if the factory seal on the carton has been broken.
In any case, this is a somewhat silly discussion. If society collapses to the point that everything but gold and ammo is worthless, we will all have much bigger problems on our hands.
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Ammo is actually really easy to check: just see if the factory seal on the carton has been broken.
In any case, this is a somewhat silly discussion. If society collapses to the point that everything but gold and ammo is worthless, we will all have much bigger problems on our hands.
Good point, I hadn't thought about valuing bullets by the box. Though the denomination might be too high for most purchases; IIRC from a news report a box of 50 .22's costs about $20 now, and it seems like that would be worth a lot more in a doomsday scenario (the equivalent of a month's food perhaps?) That might make them difficult to barter.
I agree this is all silly, but it's fun to think about as an econ/finance geek. And it does try to get at the fundamental question of, why own physical precious metals?
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Meh, I buy the ammo because I will use it over time and if prices get high enough I sell/trade some of it. What exactly would I use gold for? Can't eat it, wipe my butt with it, etc.
Gold's a compact method of storing value. $16000 worth of bullets is going to take up a closet or so, whereas that much gold has the volume of a smartphone. Gold's also more or less uniform and interchangeable- an oz of .999 gold is an oz of .999 gold, no matter the mint, shape or form. It's also relatively easy to liquidate given this uniformity.
Bullets are probably great if you're really planning for the end of the world, where the zombie apocalypse destroys almost all of civilization and we're reduced to a purely barter economy. In a less severe situation, say the collapse of a major world currency or country, I'd much prefer to have $50 in bullets and $16000 in gold than $16000 in bullets and $50 in gold. If a major currency is not being accepted, gold coins probably will be.
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Well, I put up an ad recently offering to trade some 22 ammo and I got clobbered with offers.
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...IIRC from a news report a box of 50 .22's costs about $20 now, and it seems like that would be worth a lot more in a doomsday scenario...
Did you mean 500 .22's go for about $20?
I recently purchased 6 boxes of 22lr's at ~$20-30 per box.
Cabela's has a box of 525 Federal .22s listed at $23.99.
http://www.cabelas.com/product/Shooting/Ammunition/Rimfire-Ammunition%7C/pc/104792580/c/104691780/sc/104536080/Federal174-Champion174-22L-Ammo-Per-525/1305049.uts?destination=%2Fcatalog%2Fbrowse%2Fshooting-ammunition-rimfire-ammunition%2F_%2FN-1100192%2B4294758999%2FNe-4294758999%3FWTz_st%3DGuidedNav%26WTz_stype%3DGNU&WTz_l=Unknown%3Bcat104536080 (http://www.cabelas.com/product/Shooting/Ammunition/Rimfire-Ammunition%7C/pc/104792580/c/104691780/sc/104536080/Federal174-Champion174-22L-Ammo-Per-525/1305049.uts?destination=%2Fcatalog%2Fbrowse%2Fshooting-ammunition-rimfire-ammunition%2F_%2FN-1100192%2B4294758999%2FNe-4294758999%3FWTz_st%3DGuidedNav%26WTz_stype%3DGNU&WTz_l=Unknown%3Bcat104536080)
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I'm not a prepper or apocalypse-now dude, but I am maintaining a set allocation to gold in my assets. I realize every conversation about gold devolves into talking about ammunition and canned beans, but I just do it because I think it makes sense within a diversified portfolio.
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I just got a 100 oz brick of silver, some gold AEs and a few silver coins today. Sure are shiny!
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...IIRC from a news report a box of 50 .22's costs about $20 now, and it seems like that would be worth a lot more in a doomsday scenario...
Did you mean 500 .22's go for about $20?
I recently purchased 6 boxes of 22lr's at ~$20-30 per box.
Cabela's has a box of 525 Federal .22s listed at $23.99.
http://www.cabelas.com/product/Shooting/Ammunition/Rimfire-Ammunition%7C/pc/104792580/c/104691780/sc/104536080/Federal174-Champion174-22L-Ammo-Per-525/1305049.uts?destination=%2Fcatalog%2Fbrowse%2Fshooting-ammunition-rimfire-ammunition%2F_%2FN-1100192%2B4294758999%2FNe-4294758999%3FWTz_st%3DGuidedNav%26WTz_stype%3DGNU&WTz_l=Unknown%3Bcat104536080 (http://www.cabelas.com/product/Shooting/Ammunition/Rimfire-Ammunition%7C/pc/104792580/c/104691780/sc/104536080/Federal174-Champion174-22L-Ammo-Per-525/1305049.uts?destination=%2Fcatalog%2Fbrowse%2Fshooting-ammunition-rimfire-ammunition%2F_%2FN-1100192%2B4294758999%2FNe-4294758999%3FWTz_st%3DGuidedNav%26WTz_stype%3DGNU&WTz_l=Unknown%3Bcat104536080)
If you hadn't noticed, we are in a nationwide ammo shortage that is particularly acute in the world of .22LR. I lucked into a case of CCI Standard Velocity .22 at reasonable prices. I decided to sell 4 of the 10 bricks to defray my expense. I asked $70 per brick and was nearly trampled to death by people wantint to buy it.
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If you hadn't noticed, we are in a nationwide ammo shortage that is particularly acute in the world of .22LR. I lucked into a case of CCI Standard Velocity .22 at reasonable prices. I decided to sell 4 of the 10 bricks to defray my expense. I asked $70 per brick and was nearly trampled to death by people wantint to buy it.
I'm aware. I suppose the effects of the shortage on .22's just aren't as bad by me as they are by you. .223 however, is impossible to come by in my locale.