Silver Investing Introduction

2/26/16

Here is a letter I wrote for my brother on 9/14/2012. He had recently started investing in stocks, and to talk about diversification and "money", I sent him 2oz of silver to get started in investing in precious metals. I'm sharing this if you are interested in basic information on investing in silver and the precious metals in general. Enjoy!

Hey bro! Here are some "precious metals" to get you started on diversifying your investments more:

One 1oz .999 silver bullion bar
One 1oz .999 silver bullion round

Precious metals (silver, gold, platinum) have pros and cons, like any investment. I wouldn't go crazy investing in precious metals, but keep a very small percent invested in them.

Pros	Cons
Are rare, tangible, store value, used throughout history as real money, protects against inherently worthless paper fiat money	Provides no dividends
Helps diversify your investments	Needs security
Has inherent value and can have numismatic value	Only a few types of precious metals to invest in
Don't have to worry about businessey stuff like poor management teams	Prices and returns can be volatile, may not get as much return as other investments
Can have industrial uses	May be difficult to exchange
Only slightly correlated with other investments	Buying, selling, shipping, and handling fees
Very legit metal dealers exist	TONS of rip-off/scammers exist!

Some terminology:

"Coin" means it has face value, is or was legal currency, also has numismatic ("coin collecting") value. Note, many US and other coins, especially prior to 1960, can have a high amount of silver in them. They are often worth keeping for their silver content alone, which could be more than the face value. Google for the "fineness" of various coins
"Round" is like a coin with no face value, basically a bullion bar in a coin shape

So which is better, bar or round or coin? Many would say "silver is silver is silver", so go with the cheapest to buy. I'd go with mostly bars, some rounds, of various troy ounce denominations, and probably few or no coins. But whatever you prefer, keep all in good condition, with documentation, etc.

The price of a silver item is calculated as:

Price = fineness*weight of item in troy ounces*current market price of silver per troy ounce (for this last term, Google "spot price of silver")

The .999 fine means it has 99.9% silver content. So, as I write this, Price for 2oz = .999*2oz*$34.74/oz = $69.41

You'll sometimes hear this quantity referred to as the "melt value".

Enjoy!

-Jz

I hope you found this interesting and useful. Note that this is just very basic information about investing in precious metals. For more information, you really need to do your due diligence, as with any facet of investing.

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