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Silver Coins: A Savvy Investment in Turbulent Times
For the most part, precious metals are no longer considered legal tender for industrialized nations. However, precious metals can still have a role in a well-diversified investment portfolio. There are a number of investment options in this asset class, including silver coins.
Market Ups & Downs In a recessionary market, investors scramble to look for safe havens from volatility. For example, the Standard & Poor's 500 Index has lost and rebounded almost a quarter of its value in the last year.
Recessionary markets are often characterized by inflation. Inflation is defined as an excess supply of currency leading to a rise in prices for goods and services. Sustained inflation inevitably leads to an erosion of purchasing power. Silver coins and other precious metals have traditionally done well in inflationary economies. The Bureau of Labor Statistics publishes the Consumer Price Index (CPI) on a monthly basis. The rate of inflation is compiled from that information. The rate of inflation for 2011 was roughly 3.4%.
The value of silver is primarily determined by supply and demand. The central purposes of silver are industrial (40%), exchange-traded products, jewelry and silver bullion coins. Comparatively speaking, the price of silver fluctuates more frequently than gold. Price volatility is attributed to less market liquidity and significant changes in industrial demand. Despite these sobering realities, the price of silver has been on a steady upward trend since September 2005. In fact, from 2005 until present, the price of silver has increased over 82%. This is in stark contrast to the anemic returns of the S&P 500 which posted a net decrease of -8.06% over the last five years.
In summary, the best way to protect your investment portfolio from sustaining sizeable losses is diversification. A proven way to diversify is to invest in different asset classes, namely silver coins.