Bonds or precious metals?

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Maineliberty
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Bonds or precious metals?

Post by Maineliberty » Mon May 18, 2020 2:38 pm

As of right now I hold about 60% of my portfolio in stocks and 40% in silver bullion (physical). I was going to look at bonds down the road but with the pethatic interest rates and the constant printing of money I’m wondering if investment in precious metals such as silver and gold wouldn’t be just as safe and a better investment than bonds. What are your thoughts?

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climber2020
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Re: Bonds or precious metals?

Post by climber2020 » Mon May 18, 2020 2:44 pm

Back in mid March, how did you rebalance from Silver into stocks?

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Maineliberty
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Re: Bonds or precious metals?

Post by Maineliberty » Mon May 18, 2020 2:51 pm

I did not, the silver I hold I’ve had for about 8 years. And I just started investing in my stock portfolio in late April early may.

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Re: Bonds or precious metals?

Post by Jack FFR1846 » Mon May 18, 2020 3:02 pm

8 years ago, silver was $30 to $35 an ounce. Today, around $15. With the higher acquisition costs compared with gold and the higher selling costs compared with gold, it's not something I'd recommend. I bought shortly after you did (couple years) and also took enough of a bath that I'm out of it forever.
Bogle: Smart Beta is stupid

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climber2020
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Re: Bonds or precious metals?

Post by climber2020 » Mon May 18, 2020 3:04 pm

I don't invest in any metals, but plenty here do so I'm sure people will chime in with advice on specifics.

But one of the issues I have holding physical gold or silver is difficulty rebalancing if you consider the metals to be your safe allocation.

I started investing in 2011 and people have been trashing bonds as far back as I can remember (use the search box to look up "why bonds?" and you'll see what I'm talking about), but I've been satisfied with the role bonds have played in my portfolio.

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Maineliberty
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Re: Bonds or precious metals?

Post by Maineliberty » Mon May 18, 2020 3:04 pm

8 years is a rough guess, I’m in it at about $20 an ounce.

mega317
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Re: Bonds or precious metals?

Post by mega317 » Mon May 18, 2020 3:11 pm

How do you define better investment?
Image

How do you define safe?
Image
https://www.bogleheads.org/forum/viewtopic.php?t=6212

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Maineliberty
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Re: Bonds or precious metals?

Post by Maineliberty » Mon May 18, 2020 3:17 pm

Wow, those charts are sobering. Guess I’m a little biased (to
My own detriment). It doesn’t help that I can’t understand bonds for the life of me. I get that they are essentially loans, but past that I don’t really understand their function in a portfolio. I’ve read “The Little Book of Common Sense Investing”, am currently listening to “Common sense on mutual funds”, and reading “Bogleheads guide to investing”. Yet every time bonds are mentioned it manages to go over my head.

tashnewbie
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Re: Bonds or precious metals?

Post by tashnewbie » Mon May 18, 2020 3:30 pm

Maineliberty wrote:
Mon May 18, 2020 3:17 pm
Wow, those charts are sobering. Guess I’m a little biased (to
My own detriment). It doesn’t help that I can’t understand bonds for the life of me. I get that they are essentially loans, but past that I don’t really understand their function in a portfolio. I’ve read “The Little Book of Common Sense Investing”, am currently listening to “Common sense on mutual funds”, and reading “Bogleheads guide to investing”. Yet every time bonds are mentioned it manages to go over my head.
I don't know a ton about bonds either. I recently listened to an episode of the Choose FI podcast about bonds that might be helpful to you: Episode 194 titled "The Role of Bonds in a Portfolio with Frank Vasquez"

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Re: Bonds or precious metals?

Post by Quaestner » Mon May 18, 2020 3:31 pm

I'm not sure why those have to be your only two options. I think most people here would dissuade you from a heavy (or any?) precious metal bet - particularly one so heavy on silver. Still, if you have your reasons, have you considered bringing silver into something like Harry Browne's "permanent portfolio"? Have you thought about having some precious metal equities instead of, or in addition to just silver? A mix of gold, silver, precious metal equities instead of just silver? Adding some I-bonds that keep up with inflation? I'd urge you to read up on the Bogleheads' "Start Here" page and keep an open mind about having a more diversified portfolio.

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Maineliberty
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Re: Bonds or precious metals?

Post by Maineliberty » Mon May 18, 2020 3:41 pm

Quaestner wrote:
Mon May 18, 2020 3:31 pm
I'm not sure why those have to be your only two options. I think most people here would dissuade you from a heavy (or any?) precious metal bet - particularly one so heavy on silver. Still, if you have your reasons, have you considered bringing silver into something like Harry Browne's "permanent portfolio"? Have you thought about having some precious metal equities instead of, or in addition to just silver? A mix of gold, silver, precious metal equities instead of just silver? Adding some I-bonds that keep up with inflation? I'd urge you to read up on the Bogleheads' "Start Here" page and keep an open mind about having a more diversified portfolio.
My reasoning is simple: I was ignorant. I was sold up the river on the idea that silver would do well and double in price and (shocker) it didn’t. So I’ve been holding it until I can get a decent return for it. Recently it appears it could finally go above $20 an ounce, which is making me wonder if I should dump it or keep it as part of my portfolio.

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midareff
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Re: Bonds or precious metals?

Post by midareff » Mon May 18, 2020 3:50 pm

Does silver have an interest rate to compare to bonds?

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willthrill81
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Re: Bonds or precious metals?

Post by willthrill81 » Mon May 18, 2020 4:02 pm

Jack FFR1846 wrote:
Mon May 18, 2020 3:02 pm
8 years ago, silver was $30 to $35 an ounce. Today, around $15. With the higher acquisition costs compared with gold and the higher selling costs compared with gold, it's not something I'd recommend. I bought shortly after you did (couple years) and also took enough of a bath that I'm out of it forever.
Precious metals are a lot like factors in at least one regard: you shouldn't buy them unless you're prepared for them to underperform other assets for long periods of time, at least a decade and probably longer.

For instance, gold is far off its all time high, but over the last 20 years, it's still outperformed both stocks and bonds quite handsomely.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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willthrill81
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Re: Bonds or precious metals?

Post by willthrill81 » Mon May 18, 2020 4:02 pm

midareff wrote:
Mon May 18, 2020 3:50 pm
Does silver have an interest rate to compare to bonds?
The theoretically expected real return of silver is zero, which is better than bonds right now.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

staustin
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Re: Bonds or precious metals?

Post by staustin » Mon May 18, 2020 4:03 pm

with the pathetic interest rates and the constant printing of money I’m wondering if investment in precious metals such as silver and gold wouldn’t be just as safe and a better investment than bonds. What are your thoughts?
historical charts may not be terribly relevant in the current 'soft' mmt environment in which we find ourselves in, at least near term. As such, i'd agree with your initial statement. Particularly since the bond market's tolerance of this current policy stance seems to give support to the idea that governments have much more room for deficits, money printing and financial repressions (suppression of interest rates) than previously thought. As others have noted however, no one knows where or how this current experiment will end. Hyperinflation would seem more likely than deflation if the mmt policy becomes more permanent.. as such, until the picture becomes more clear, moving treasuries and cd's maturing in my ladder, to a gold etf.

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willthrill81
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Re: Bonds or precious metals?

Post by willthrill81 » Mon May 18, 2020 4:04 pm

climber2020 wrote:
Mon May 18, 2020 3:04 pm
I don't invest in any metals, but plenty here do so I'm sure people will chime in with advice on specifics.

But one of the issues I have holding physical gold or silver is difficulty rebalancing if you consider the metals to be your safe allocation.

I started investing in 2011 and people have been trashing bonds as far back as I can remember (use the search box to look up "why bonds?" and you'll see what I'm talking about), but I've been satisfied with the role bonds have played in my portfolio.
Holding physical precious metals or via funds is not a mutually exclusive decision. You can do both. Similarly, a lot of people here own EE bonds and I bonds, but those cannot be effectively be used for rebalancing purposes either.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Bonds or precious metals?

Post by robert_b » Mon May 18, 2020 4:48 pm

Too many are buying bonds and not so many precious metals, so I changed from bonds to pm.

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Re: Bonds or precious metals?

Post by suemarkp » Mon May 18, 2020 6:40 pm

If I had 40% of my portfolio in silver, I'd have about 25 monster boxes. That's a lot of silver to store. If you like the idea of precious metals, I'd pay attention to the historical prices curves (as was shown above) and look at other metals. Buy when they are low and sell when they are high. Platinum is down in the dumps (good time to buy), and much more space efficient than silver. When it finally gets back to parity with gold or exceeds gold, I'll swap it for gold. Physical also sucks for buy/sell spread, but there are other reasons to hold physical metals as opposed to paper. So consider whether you want paper or physical.

I have about 900oz of silver and my average purchase price was near $20/oz. Once it gets back up near $20 (hoping soon this time...), I've got about 300oz I want to get rid of. Not sure where the money will go -- mutual funds, platinum, cash... If it keeps going higher, I'll sell another 200oz.
Mark | Kent, WA

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Re: Bonds or precious metals?

Post by stuper1 » Mon May 18, 2020 6:47 pm

If you want to understand both bonds and precious metals a lot better, check out the articles posted under "Insights" at www.portfoliocharts.com.

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Re: Bonds or precious metals?

Post by BolderBoy » Mon May 18, 2020 7:36 pm

Maineliberty wrote:
Mon May 18, 2020 3:17 pm
... I can’t understand bonds for the life of me. I get that they are essentially loans, but past that I don’t really understand their function in a portfolio.
I'm not a bond expert. The purpose of bonds in a portfolio is to mitigate portfolio volatility. If they provide interest income, so much the better. My current AA is 30/70 so I have lots of bonds and no regrets.

Mr Bogle's stated objection to owning precious metals is that they "have no internal rate of return".
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

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Re: Bonds or precious metals?

Post by mega317 » Mon May 18, 2020 7:52 pm

suemarkp wrote:
Mon May 18, 2020 6:40 pm
Buy when they are low and sell when they are high.
Seems sound.
suemarkp wrote:
Mon May 18, 2020 6:40 pm
I have about 900oz of silver and my average purchase price was near $20/oz. Once it gets back up near $20 (hoping soon this time...), I've got about 300oz I want to get rid of.
:oops:
https://www.bogleheads.org/forum/viewtopic.php?t=6212

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Re: Bonds or precious metals?

Post by suemarkp » Mon May 18, 2020 9:38 pm

I think many people who buy precious metals get sucked in at the beginning and buy at too high of a price. $25 seemed cheap compared to what it was a year or two before ($30 and up to $50). I kept buying on the way down, and decided I had enough silver when it was $14/oz. Over time, I found better places to buy with less markup, and became more aware of timing and price volatility.

I'll have to decide when I sell, do I sell the cheaper stuff for a profit, or write off the capital losses on stuff I bought at $20 to $25.
Mark | Kent, WA

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Re: Bonds or precious metals?

Post by DanFrancis » Tue May 19, 2020 3:08 am

I've been tempted to buy gold from time to time, but never have. If I did, it would be less then 10% of my portfolio and then in an ETF. I've been investing for decades and have learned so much along the way. I have settled for now on a Vanguard Target Fund plus 10% of my portfolio in about 10 stocks. As I age into retirement, I'll probably sell off the stocks and only have a Bogle-style portfolio. It seems too easy! But I've come to see how it makes the most sense for most people...including me. BTW, I haven't studied gold for years, but as I recall, taking into account inflation, gold has basically stayed the same for centuries. At least bonds have averaged 3% gain per year. And how well do you really need to understand bonds. I assume you use a computer...how much do you really understand all aspects of a computer? And yet, you use it.

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Re: Bonds or precious metals?

Post by Valuethinker » Tue May 19, 2020 4:53 am

Maineliberty wrote:
Mon May 18, 2020 2:38 pm
As of right now I hold about 60% of my portfolio in stocks and 40% in silver bullion (physical). I was going to look at bonds down the road but with the pethatic interest rates and the constant printing of money I’m wondering if investment in precious metals such as silver and gold wouldn’t be just as safe and a better investment than bonds. What are your thoughts?
If you want protection from inflation, even at today's yields, you are better off in TIPS bond fund. You are then guaranteed protection against unexpected CPI inflation (for expected inflation, the yield gap between TIPS bonds and straight Treasury bonds, already reflects that).

If you want stability in your portfolio then bank CDs, or a Short Term US Treasury bond fund is a better bet.

If you want protection against deflation, a Long Term US Treasury bond fund is your best bet.

I would not hold more than 10% of my portfolio in precious metals - silver is the PM I really would not bother holding. But a mix of PM equities & the actual physical stuff. Remember the long run expected return of a PM is 0 minus the physical storage costs (which is why you want the more dense, more valuable metals).

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climber2020
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Re: Bonds or precious metals?

Post by climber2020 » Tue May 19, 2020 6:00 am

willthrill81 wrote:
Mon May 18, 2020 4:04 pm
climber2020 wrote:
Mon May 18, 2020 3:04 pm
I don't invest in any metals, but plenty here do so I'm sure people will chime in with advice on specifics.

But one of the issues I have holding physical gold or silver is difficulty rebalancing if you consider the metals to be your safe allocation.

I started investing in 2011 and people have been trashing bonds as far back as I can remember (use the search box to look up "why bonds?" and you'll see what I'm talking about), but I've been satisfied with the role bonds have played in my portfolio.
Holding physical precious metals or via funds is not a mutually exclusive decision. You can do both. Similarly, a lot of people here own EE bonds and I bonds, but those cannot be effectively be used for rebalancing purposes either.
I agree, but the OP is 60/40 stocks/silver bullion and treating his silver as the safe portion of the portfolio. That's a lot of silver and not an easy rebalancing situation, especially if you have a limited timeframe to make the transaction like what we just went through.

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midareff
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Re: Bonds or precious metals?

Post by midareff » Tue May 19, 2020 6:20 am

willthrill81 wrote:
Mon May 18, 2020 4:02 pm
midareff wrote:
Mon May 18, 2020 3:50 pm
Does silver have an interest rate to compare to bonds?
The theoretically expected real return of silver is zero, which is better than bonds right now.
Not really....... the Short Term Corp Index, IT Corp Index and IT Tax-Ex are all positive for the year and have a positive 12 month real return.

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willthrill81
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Re: Bonds or precious metals?

Post by willthrill81 » Tue May 19, 2020 9:27 am

midareff wrote:
Tue May 19, 2020 6:20 am
willthrill81 wrote:
Mon May 18, 2020 4:02 pm
midareff wrote:
Mon May 18, 2020 3:50 pm
Does silver have an interest rate to compare to bonds?
The theoretically expected real return of silver is zero, which is better than bonds right now.
Not really....... the Short Term Corp Index, IT Corp Index and IT Tax-Ex are all positive for the year and have a positive 12 month real return.
I'm not talking about the past, which we unfortunately cannot buy. I'm talking about expected returns going forward.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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midareff
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Re: Bonds or precious metals?

Post by midareff » Tue May 19, 2020 1:22 pm

willthrill81 wrote:
Tue May 19, 2020 9:27 am
midareff wrote:
Tue May 19, 2020 6:20 am
willthrill81 wrote:
Mon May 18, 2020 4:02 pm
midareff wrote:
Mon May 18, 2020 3:50 pm
Does silver have an interest rate to compare to bonds?
The theoretically expected real return of silver is zero, which is better than bonds right now.
Not really....... the Short Term Corp Index, IT Corp Index and IT Tax-Ex are all positive for the year and have a positive 12 month real return.
I'm not talking about the past, which we unfortunately cannot buy. I'm talking about expected returns going forward.
On treasuries and other government guaranteed bills, notes, etc., I agree with you. I see them as an inflated liability at this point, YMMV. From IG corporates I expect the see dividend/interest remain fairly constant as they recover any "shock" declines, same with munis... the better quality ones. Already see positive returns for the year from them..

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Re: Bonds or precious metals?

Post by Jefferson » Tue May 19, 2020 4:15 pm

I own some gold and silver (physical coins), but I do not consider them part of my portfolio. They are not investments. They are an insurance policy. They would only be used in a true SHTF scenario.

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