Buy silver because inflation is coming and stocks will fall, a senior broker told me when I started my investment career some thirty years ago. The seasoned broker's office was impressive, lined with charts and graphs adorning his wood-paneled walls. He referenced his charts and educated me on why silver would rise and stocks would fall. How did his prediction turn out?
In 1990, silver traded at $5.59 an ounce, and it's currently selling for $23.41. Had I taken his advice and bought silver, my average return would have been 4.55%. A $10,000 investment in silver is now worth $42,000.
What about stocks? The S&P 500 in January of 1990 was 353, and today it closed at 4,704, a gain of 1,230% or 8.45% per year. A $10,000 investment is now worth $133,000, or three times the amount of the silver trade.
Inflation is climbing, and commodity investments are popular again. Inflation currently yields 6.22%, the highest level since 1990 where it touched 6.27%, and by January 1992, it dropped to 2.6%. In August 2008, the inflation rate was 5.37%, and by July 2009, it crashed to a negative 2.1% during the Great Recession.
Post World War II, the highest inflation rate occurred in 1980, exceeding 14.5% before falling to 2.86% in 1983. Where is inflation going? I don't have a clue, but inflation spikes don't last long. For the past thirty years, I've heard the stock market is overvalued, and silver, gold, wheat, oil, etc., was going to outperform stocks. In the short term, this may be true, but I will always place my bet on a diversified portfolio of stocks.
How much better to get wisdom than gold, to get insight rather than silver! Proverbs 16:16
November 18, 2021
Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM's custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.
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