So I was wondering do any of you know what the comparison would have been if I had left my money in the bank over the last 10 years what I would have had now, compared to the value of what PM's would have been. So if I took the scenario that I purchased an Oz of Gold in 2000 the same value Silver and finally a deposit of the same value in the bank. Based on Historic interest rates for the years on average what would the end result be ? Has anyone done a comparison or know of a comparison. If anyone wants to have a go and and see what would have made the better investment ? Not sure if this is a good comparison or not. The interest would also be compounding as it was left for entire period.
Well I went and looked at some figures and took a few things for granted and worked out on average Interest rates for the year and what the approx average for Gold/Silver was in 2000 as well. I cam up with the following. Deposit $300 / 10 years later with compound interest = $564.25 - Initial deposit = $264.25 Profit 60oz Silver @ $5/oz / 10 years later approx = $1800.00 - Initial Deposit = $1500 Profit 1oz Gold @ $300/oz / 10 Years later approx = $1390.00 - Initial Deposit = $1090 Profit So it appears Silver would have been a clear winner here as well ? Comments or thoughts
In Jan 2000 the PMint Ask price for Gold was $435.34 ozt and Silver was $7.99 ozt ($435.34 gets you 54 and a half oz's). $435 invested at 5% pa compounded for 10 years gives you $716.45 ($791.44 @ 6%)minus tax and bank fee's. Therefore: Gold $435.34 to $1378.32 Silver $435.34 to $1588.13 Bank $435 to $716.45? But Gold and Silver you dont pay tax on till you sell. Bank interest you have to inform the ATO of each year, plus the bank fee's. Just a start....but it supports your calc's
Thanks PS as long as the theory stacks up that was the objective. I was also thinking about property and in 2000 I purchased a place for about $160K if I had purchased the same dollars in Silver (Being the top performer) The house would have a value of approx $450K but the Silver would have been worth $608K using spot of $30 to make it easy (using $7.99 for purchase cost) again there are variables and costs associated with each but again a clear winner based on this simple comparison. And we are expecting bigger things in years to come !!
That would only work if you paid cash for your home. I bought 2 IP's around 2001 and borrowed 80% on both. If I'd have put it into silver instead I'd be down almost $150k. It's better to be a cycles guy than a PM bug.
Have you calculated stamp duty on both end buy and sell, real estate agency fee, maintenance cost, capital investment, rates, body corporate fees, taxes, capital gains, insurance, and bank fees. I sold my IP in 2005 and invested in silver privately. Glad I did it that way.
+1 I'll always maintain a core stack, but if it makes sense to switch into another asset class, I will do so.
Initial Investment: $10,000 Marginal tax rate ($37k to $80k): 30% Cash Interest Rate: assume monthly term deposit at RBA on call rate, interest accumulated monthly Cash Tax: assume marginal tax rate paid each Oct on prior July-June tax year CGT: 50% of gain x marginal tax rate paid at Nov 2010 Investment Period: Jan 2000 to Nov 2010, value of $10,000 after tax: Cash: $15550.31 S&P/ASX 200 Accumulation Index: $20833.30 AUD Gold: $28101.95 AUD Silver: $29770.83 Precious Metal beats stocks WITH dividends reinvested (assuming no tax on dividends reinvested). Investment Period: Jan 1990 to Nov 2010, value of $10,000 after tax: Cash: $ 27139.95 S&P/ASX 200 Accumulation Index: $57116.11 AUD Gold: $24109.50 AUD Silver: $33991.55
My IP LVR's are around to mid 30%, I treat my tenants well, and I keep my rents lower than they could be. I also rent myself. Both properties are positively geared and if silver goes to about $100 an oz that would cover my loans. I do follow AusPM's blog and think he is right in every thing he says but I also think if I tried to pay cash for my first home Id still be saving. I only have debt on property and save and pay cash for everything else, but we have an independent culture and we want to move out of our parents home when we can. And yes I understand all the expenses associated with buying, owning and selling property but I never plan to sell and they are positively geared after all expenses. I have gold and silver in my super as its a minimum of another 40 years till I can touch it, but there will be plenty of other opportunities between now and then that I will use out of super, and I'm sure property, shares and PM's will be some of them. We all want to own a home and be debt free, but sometimes taking on conservative debt is the way to get there.
I invested in PM because the US budget deficit was around 500 billion annually and no sing going down and that seemed unsustainable even that time. In 2011 the US will pay around trillion on interest payment alone, but if interest rate goes up they have to issue even more treasury bonds and that will push up interest rates up even higher. Even more treasury bonds will follow this (or QE because the world doesn't have that much savings even if they want to buy them). So watch interest rates and if that brings lower prices initially go and buy more. Don't forget gold made the highest annual gain in 79 when interest rate was skyrocketing.
FYI, Value $10,000 needs to grow to, to keep pace with CPI Jan 2000 to Nov 2010: $13964.54 Jan 1990 to Nov 2010: $17469.76 Jan 1980 to Nov 2010: $38769.57 Investment Period: Jan 1980 to Nov 2010, value of $10,000 after tax: Cash: $83500.14 S&P/ASX 200 Accumulation Index: $284541.50 AUD Gold: $30033.53 AUD Silver: $12971.41 Jan 1980 to now is bad starting point and based on average Dec 1979 prices of $415.09 for gold and $20.11 for silver. Interesting if you start in 1982 then CPI value of $10,000 now is $31915 compared to gold $34000 and silver $29910, so fair to say PMs kept pace with inflation over the long term in Australia.
