Frugal Fridays: Return on Investment

Welcome to Frugal Fridays where we share money saving tips, discuss living frugally and generally talk about personal finance issues.  Last week at lunch on Saturday, my friends and I were having a discussion about different types of investment and retirement accounts and how to decide where to put your savings to maximize your long term return.  (As an aside, yes, I know we are all nerds, no need to point that out in the comments.)  Anyhow, we are all pretty bright people, and yet we found we sometimes had trouble predicting what would be the expected rate of return under different circumstances.  Which got me thinking about how computing rate of return can be a really difficult calculation to make sometimes.  I want to take a stab at clearing up some of the confusion around this topic, today.  In the end, however, I may be as confused about this as anyone, so if you see something I say that you disagree with, please don't hesitate to point it out in the comments.

Disclaimer: I am not a financial professional.  I'm just a consumer who tries to be educated.  Take anything I say with a grain of salt.  

Before I dive into the details, I want to make it clear that return should not be the only factor you consider when choosing your investments.  Other factors, such as risk and liquidity, can be equally important to consider.  In addition, there are costs and benefits that may be not monetary, such as societal or environmental concerns.  Don't forget to factor in the value of your time.  How you weight each of these factors is a personal decision.

Return on Investment (ROI)
The basic formula for calculating annual ROI for a one year investment is very simple:

ROI = (Final Payoff - Initial Investment) / (Initial Investment) * 100

What could be simpler, right?  There are only two terms in this equation.  The devil is in the details of how to compute each of these terms.  If you are talking about a one time investment and a one time payoff, which you are taxed on immediately, it is relatively straightforward but anything more complicated than that can get tricky.

If your Initial Investment is made over time, rather than all in one initial lump, you need to pro-rate your investment to account for that.  Similarly, if your Final Payoff is made over time, such as in the form of dividend payments from a mutual fund, you need to account for that as well.  Even more complicated is a situation where you get both payments over time and some capital gain at the end of the term.

Compounding and the "Rule of 72"
The above formula computes simple interest for a single year.    It doesn't take into account the effect of compounding your interest over multiple years.  Compounding has the effect of increasing your effective rate of return.  If you put money into a savings account at 6% interest for 12 years, your total rate of return is not 72% (6 * 12) but rather almost exactly 100%.  This is a simple illustration of both the power of compounding and the "Rule of 72"  If you are trying to figure out how long it will take to double your money with an investment whose rate of return fluctuates from year to year, a good rule of thumb is that your initial investment will double when the sum of the annual returns you receive reaches 72.  For example, if you earn 8% for the first 5 years, then 4% for the next 3 years and then 10% for the next 2 years your investment will have doubled in those 10 years (8*5 + 4*3 + 2* 10 = 72).  This rule of thumb is less accurate for very high or very low interest rates, but it is useful as a first order approximation of your long term rate of return.

Fees and Other Costs
You need to deduct any fees or other incidental costs you have to make this investment from your Final Payoff amount.  Some of these fees are obvious, such as account maintenance fees or brokers sales commissions, but some are less obvious and some are really hard to put a dollar value on.  Back in the 90s, when day trading was popular, some people rented office space with special computer hardware and software.  All those expenses need to be factored in when computing their return.  That's probably a really bad example, since my understanding is that most of those people ended up with a negative return anyway, but you get the idea.

Taxes
The above discussion has all been concerned with computing pre-tax ROI on your investments, but in actuality, your tax obligation will change your effective rate of return.  To compute the after-tax ROI, subtract the tax you owe from your Final Payoff amount.

Unfortunately, this calculation is much easier said than done, particularly when you are talking about predicting future taxes on investments you have yet to make.  Some very smart people spend their entire careers examining this issue and trying to find optimal solutions for individuals so I am not going to by any means be able to cover this exhaustively here.  I just want to throw out a few ideas for your consideration.  Keep in mind that tax laws are constantly changing.  If you are trying to predict what the tax consequences will be on some investment gain you realize in the future, there are no guarantees the laws won't change between now and then.

• Currently, long term capital gain rates are lower than ordinary income rates, so it may make sense to try to invest in instruments that will produce long term capital gains rather than short term dividends or interest payments.
• Roth accounts (both 401Ks and IRAs) allow you to grow your investments tax free.  This lets the power of compounding work for you in ways that it can't in accounts where the gains are taxed when you realize them.
• Standard IRA and 401K accounts afford you a tax deduction when you initially make your deposit.  This has the effect of increasing your initial investment at no cost to you.  In addition, your gains are not taxed in these accounts, which may allow them to grow more quickly than in taxed accounts. However, all your withdrawals from these accounts (both gains and original investment) will be taxed at your ordinary income tax rate when you make them.  Quite possibly that rate will be lower than your current tax rate, so in the long run these accounts will be beneficial for most people, but not for everybody.
• The interest that you pay on your home mortgage is, unlike interest that you pay on other loans, tax deductible.  Paying  your mortgage off early may not be the best way to invest your extra cash, particularly if you itemize your deductions on your tax return.

Further Resources
If you want to read even more, here are some good resources I've found:

• BankRate has good advice articles, calculators for various financial purposes and is also a great source for finding banks that offer the best investment return rates for IRAs, CDs, Money Market Accounts, and other types of accounts.
• Investopedia is another site with a very good glossary where you find the definition of many other confusing terms you may encounter and advice articls.
• Dinkytown has a ton of financial calculators for almost every conceivable scenario.

Frugal Tip of the Week: Have you ever lost a camera or memory card with pictures?  Have you ever found someone else's?  If the answer to either of these is yes, go look at I Found Your Camera which tries to reunite lost photos with their owners.  

Upcoming Frugal Fridays
There will be guest authors and other changes to Frugal Fridays in the upcoming weeks.  Here's what you have to look forward to:
April 4: I'll be guest hosting a combined Frugal Friday/Mojo Friday diary as a standin for TexDem.  Look for it at 7:30 am PDT
April 11: plf515 will be guest hosting here and his regular Friday diary, What Are You Reading?, will be guest hosted by someone else
April 18: business as usual
April 25: AnnieJo will be guest hosting Frugal Fridays
May 2: blue jersey mom will be guest hosting Frugal Fridays
May 9: back to business as usual, at least for a while

If you are interested in writing a diary for this series, or you have a topic you'd like to see covered, or if you want to be added to the mailing list for announcing these diaries, email me: frugalfridays (at) gmail.com.

•  ROI jar

  What is my Final Payoff for my Initial Investment in writing this?  Let me know here!

  by sarahnity on Fri Mar 28, 2008 at 12:37:58 PM PDT

  •  many happy returns!

    i, sadly, an educated professional former careerist, have let my spouse take this stuff over while i am being a mom.  bad me.  

    must ask.  will email soon,

    by jlms qkw on Fri Mar 28, 2008 at 12:41:55 PM PDT

  •  sarah, do you know flylady?

    Flylady

    she's running a FACE (financial tips) session right now.  here is an excerpt from today's email:

    "Everything that goes into your mouth comes out of your pocketbook;
    even if it is going down the mouth of your garbage disposal. Let's
    stop feeding disposal and start feeding our families. This is money
    that we can use to pay off our credit card debt. Credit cards eat our
    real money too, but that is another essay! "

    by jlms qkw on Fri Mar 28, 2008 at 12:47:11 PM PDT

    •  Hmm

      I'm having a disposal installed today. I only plan to use it on food too spoiled for the dog to eat and kitchen scraps too greasy to use in the compost heap.

      by droogie6655321 on Fri Mar 28, 2008 at 12:49:41 PM PDT

      •  Careful about quantity on the fatty/greasy stuff!

        Clogs pipes and all that.  :-)

        by AnnieJo on Fri Mar 28, 2008 at 12:54:11 PM PDT

        •  Yeah, I know

          It's just that I usually only use uncooked vegetable and fruit matter in the compost, so that's what I meant.

          by droogie6655321 on Fri Mar 28, 2008 at 12:58:27 PM PDT

    •  I've seen her site

      I don't follow her too closely, but I've checked it out once in a while and I like what I've seen.  

      by sarahnity on Fri Mar 28, 2008 at 01:23:56 PM PDT

      •  i like it a lot

        as long as i take it in bits and pieces!  helps my mommy brain a lot to have the routines.  

        by jlms qkw on Fri Mar 28, 2008 at 01:42:38 PM PDT

•  I've never found a camera...

  ... but I did lose one after a night of drinking. When it was returned, there was a single photo of a pen filled with mooing cows at the end of the roll of film.

  I have no idea whose cows those were, and I'll never know who visited them.

  by droogie6655321 on Fri Mar 28, 2008 at 12:46:44 PM PDT

•  ROI

  I'm asking this for a "friend".

  My "friend" has invested a lot of money and people in a hostile takeover. While he had some rosy revenue projections over five years ago before he decided on the takeover, the revenue hasn't flowed in the manner he predicted. In fact, he's been losing a lot of money and people. I think he's nearly bankrupted his company too.

  Now he's saying that we have to keep putting money and people into making this hostile takeover work. He insists he isn't sending good money and people after an increasingly, bad investment.

  How much should my "friend" he keep investing in his takeover attempt without any sign of a positive return?

  by Magnifico on Fri Mar 28, 2008 at 12:47:17 PM PDT

  •  Your "friend"

    should get the heck out of Iraq.

    by ilex on Fri Mar 28, 2008 at 12:55:28 PM PDT

    •  Oh man do I feel dumb

      Ignore my advice below.  Or maybe not.  Hmm, rereading it in light of what I know now it's not so bad after all.

      by sarahnity on Fri Mar 28, 2008 at 01:25:28 PM PDT

  •  That's a tough one

    that only your "friend" can decide.  It's a really hard thing to do to say, "this far and no farther am I willing to slide down this rat-hole" but it may be the best course of action.  One thing that might help is if he could sit down and detail everything he's put in so far (time and money) and then put down what the different returns he could get (best case, worst case, something in between) and then figure out how much further he is willing to go to get that return (with the understanding that the ultimately worst case is no return at all).  Draw a line in the sand and if he's already past that line, stop now.  If not, at least there will be a concrete milestone to stop in the future.

    by sarahnity on Fri Mar 28, 2008 at 01:01:07 PM PDT

•  Tax free Investments... Marginal Tax Rate?

  Municipal bonds are taxfree, as well.

  But a good deal of people's marginal tax rate is something like 15% on capital gains.

  So, to put this in perspective....

  8% gain from 401K is NOT better than 12% gain if you're investing yourself.

  by RisingTide on Fri Mar 28, 2008 at 12:50:24 PM PDT

  •  True, but don't rely that you can always get 12%

    It looks like we are heading into a down market and the days of 12% return may be gone for a while.  I think that consistently, over the decades, you can expect about 6% return from the markets.

    by sarahnity on Fri Mar 28, 2008 at 01:03:12 PM PDT

    •  buy and hold was never a sound strategy....

      Invest yourself, and reap the profits!

      (or console yourself that 6% with double the money invested means the same amount of profit).

      12% is a rather conservative estimate for someone who is decent at playing the stock market (week trader or day trader).

      by RisingTide on Fri Mar 28, 2008 at 01:07:40 PM PDT

      •  I beg to differ

        I mean sure, if you define someone who is "decent at playing the market" as someone who gets better than 12% return consistently, then sure, what you have is a truism and of course I can't argue.  But I contend that those people are actually the lucky subset of people who "pay attention, research what they do and are fairly smart".  No matter how good and how much effort you put into it, there are enough unpredictables in the market that anyone can get caught in a bad situation.  Those who are beating the indices are mostly just lucky, not better.  I'm excluding people I think are true geniuses like Warren Buffett.

        by sarahnity on Fri Mar 28, 2008 at 01:21:31 PM PDT

        •  sarah... more than 70% of the money on the stock

          market comes from less than a hundred independent entities. These entities employ a lot of people. They don't pay for people who aren't good at playing the stock market.

          You make your money on the stock market one of two ways:

          1. Finding genuine potential for growth before everyone else does.

          2. Cheating the dumb money.

          Yes, anyone can get caught in a bad situation, but if you're smart you've spread out the risk so that you can eat 15% losses in one bucket or another.  

          But beating the indices is a fools game to begin with -- too much in commissions. ETFs and other index based trading strategies do just as well in the long term, without the heartburn.

          Getting 12% isn't at all out of the ordinary (though it's probably well over one standard deviation outside of the dumb money--401ks). People who get 1000% return on investment in a year -- they're just lucky.

          by RisingTide on Fri Mar 28, 2008 at 01:34:03 PM PDT

          •  And yet

            Managed mutual funds, these entities you mention, who spend a lot of time and money paying people to figure out how to time the market, very rarely beat the index funds when you look at decades of performance.  If it were so easy to beat the market indices, they would do so consistently.

            by sarahnity on Fri Mar 28, 2008 at 01:43:44 PM PDT

            •  Those are NOT the entities i'm mentioning...

              sorry to disappoint you. ;-)

              I'm talking Hedge Funds and Wall Street speculators themselves.

              You gotta realize you're small fry in a rigged game to have any hope of winning.

              Managed mutual funds have very little incentive to make much money (and they always kill the ones that do poorly, so don't take anything they say at face value).

              by RisingTide on Fri Mar 28, 2008 at 01:46:47 PM PDT

              •  But even some of the Hedge Fund managers

                and other speculators, who are very bright, very highly paid and very well educated people who spend many hours of their time and energy pouring over this stuff get into horrendous situations.  I think it's highly unrealistic to expect average people, who I would be surprised if they spend more than 2 hours a month thinking about their investments, to be getting 12% conservatively.  If it were really that easy to beat the indices consistently, more managed funds would do it.  

                by sarahnity on Fri Mar 28, 2008 at 02:05:23 PM PDT

                •  they don't have much incentive to.

                  If you're not going to think about your investments, you're likely to not make more than inflation, period.

                  In which case, why invest in the stock market at all? You'd be better off getting bonds...

                  by RisingTide on Mon Mar 31, 2008 at 05:32:52 AM PDT

•  A tip:

  When purchasing online, Google the name of the online store or manufacturer of the item along with the phrase "promo code".

  There are dozens of sites where users share promo codes that can save you an average of $10 to $15 on small online purchases.

  At the very least, you can usually find a promo code for free shipping, which is always cool.

  by droogie6655321 on Fri Mar 28, 2008 at 12:51:33 PM PDT

  •  Also store coupons

    If I'm going shopping to a specific store, I try to google Store Name coupon and I often come up with stuff.

    by sarahnity on Fri Mar 28, 2008 at 01:04:21 PM PDT

    •  Know about them too

      There's lots of Hot Deal sites on the Internet. They're good for savings on things you needed to buy. They're bad when you're tempted to buy stuff you don't need because it's such a great deal!

      by dwcal on Fri Mar 28, 2008 at 01:11:40 PM PDT

•  Best return on investment I've found...

  saving up to buy a car, not taking a loan. can save 25-33% on a car.

  by RisingTide on Fri Mar 28, 2008 at 12:52:28 PM PDT

  •  Strictly speaking

    This doesn't generate an income stream.  Also, some cars come with financing so low that you are winning by simply paying in cheaper (future) dollars later as inflation takes over.

    You can do the calculation.

    by theran on Fri Mar 28, 2008 at 12:54:41 PM PDT

    •  if you believe in inflation....

      I got some choice land near New Orleans to sell you.

      (we're looking at the potential of large deflation... ie great depression worldwide this time).

      Since the car dealership gets all your information (and most people can't do math in their head), they tend to jack up the price if they know you want to finance the car.

      by RisingTide on Fri Mar 28, 2008 at 12:58:30 PM PDT

      •  Never ever mix financing with price discussions

        When you are negotiating a deal, refuse to discuss financing, tell them you have your own.  Then, once the deal is set, you can ask what kind of loan they can offer.  Sometimes it will be much better than you can get elsewhere.

        by sarahnity on Fri Mar 28, 2008 at 01:06:55 PM PDT

        •  I'd wager you'd be better off getting the loan at

          a local credit union.

          but that's based on my own experience.

          by RisingTide on Fri Mar 28, 2008 at 01:08:21 PM PDT

          •  Usaually, but not always

            It doesn't hurt to check.

            by sarahnity on Fri Mar 28, 2008 at 01:10:44 PM PDT

          •  My CU Beat My Dealer Loan

            We bought a car a couple of years ago, and refinanced our loan with the CU when they had a special deal. I was amazed that a used car loan from the Credit Union ended up being better than the original loan from the dealer.

            by Tuba Les on Fri Mar 28, 2008 at 02:49:02 PM PDT

        •  When I bought my car in Dec of '06, I had test

          driven the car the previous August/September and told the dealer up front that I was in absolutely NO rush to buy a car as my then current car was just fine for what I was doing.  (Old car was an '89 Honda Accord, 2 door, stick, with 87k miles, and some 'hardware' issues - engine just fine)  The local Honda dealer kept bugging me and the local Toyota called about 2 weeks later and never bothered me again, which I really appreciated.

          They asked what type of monthly payment I'd want.  DO NOT answer this question, or be extremely vague about it.  They will base the price of the vehicle off that.  They'll ask you what you plan on doing with the 'old' car.  Again, be very vague answering this.  My reply was, junk it, donate it somewhere, trade in, or sell on my own.

          I had done research on what car to get (Honda or Toyota were my final choices) and decided on a Corolla after test driving.  Then in December, I hauled my dad for moral support to the local Toyota dealership and told them what I wanted and what I'd pay.  We started haggling on price..... IIRC, we settled on 16800 plus tax, title, etc.  Then the dealer was going around to get the car for me to inspect (it had just gotten off the transport truck and no one had driven it yet - 15 miles on the odometer when I took possession).  That left the 'money' guy in the room with us.  I then said, ok, how much for my 'old' car.  You would not believe the look on the guys face!!!  It was priceless!!!!  I got $900 for the old car, they were afraid that I'd walk out, as I had not sign anything yet (and that was the rough blue book value anyway and I knew it had some 'issues').  

          I wrote a check the next day for $16,900.  This included tax, title, everything.  The 'sticker' price was around $18,500 (6 cd stero system, ABS, side impact air bags, etc - pretty well loaded for a Corolla).  I'm keeping the car until my nieces are old enough to drive, maybe 8 years from now.  It currently has 46, or 4700 miles on it, so it will last until then.  I took out no loans for the car either.  I had been saving for a couple of years and getting headaches thinking about spending that kind of money!!

          by nchristine on Fri Mar 28, 2008 at 01:32:09 PM PDT

          •  That's the way to do it.

            Keep those negotiations separate.  Car dealers are very good at negotiating in the way they have been trained to do.  You are never going to beat them at their own game.  Change the paradigm and you may have a chance.

            by sarahnity on Fri Mar 28, 2008 at 02:07:11 PM PDT

    •  What retirement account generates income streams?

      If you had to generate an income stream to be investing, you'd have to either be in Blue Chips, CDs or bonds -- and there are a lot of other ways to invest.

      by RisingTide on Fri Mar 28, 2008 at 12:59:21 PM PDT

  •  Except

    4 years ago I bought my car with a 4% interest rate. That was a regular rate, not a promo rate in lieu of the cash rebate.

    by dwcal on Fri Mar 28, 2008 at 12:56:20 PM PDT

    •  so how much extra did you end up paying

      ... with interest?

      by RisingTide on Fri Mar 28, 2008 at 01:03:23 PM PDT

      •  You mean what were the total interest payments?

        They would be a lot less than he earned by putting the money into an index fund or even a CD at the time.  Even if you have the cash, sometimes it makes sense to take out a loan if the rates or other terms are very favorable and then put your cash into another investments.

        by sarahnity on Fri Mar 28, 2008 at 01:10:05 PM PDT

      •  Not sure

        It was 4% amortized over 4 years. At rates that low it was worth holding onto my money and paying it off in future dollars devalued by inflation.

        by dwcal on Fri Mar 28, 2008 at 01:15:40 PM PDT

•  Inflation

  will drink your milkshake.  Best luck to all.  FWIW, I've read analysis recently that U.S. Treasuries beat the stock market in the long term when you adjust for inflation.

  by ilex on Fri Mar 28, 2008 at 12:53:46 PM PDT

  •  this hasn't been generally the case...

    but it may very well be if you start adding in this year's 12% drop in stocks.

    by RisingTide on Fri Mar 28, 2008 at 01:04:02 PM PDT

  •  Good point

    Inflation is definitely something you should factor in to this calculation that I completely forgot to mention.

    by sarahnity on Fri Mar 28, 2008 at 01:27:35 PM PDT

•  Risk and return

  I'm fortunate enough to have some savings now, mostly because I never bought that house 4 years ago before I got priced out.

  I was getting good returns from bond ETFs paying 8-9% interest but I also found out about risk when the liquidity crisis hit. Not sure where to get safe 6% returns. CDs are maybe 5%. Money market accounts are maybe 4%.

  by dwcal on Fri Mar 28, 2008 at 01:02:27 PM PDT

  •  don't go for safe 6%

    you'll lose out on inflation...

    Try for the risky bets, they're actually the most conservative options out there right now (when all the conservative bets are sure to fail...go risky!)

    by RisingTide on Fri Mar 28, 2008 at 01:06:06 PM PDT

•  I have subscribed to you Sarahnity

  I need sufficient time to absorb your lessons.  I'm hopeless with this stuff and I plan to start reading your diaries, in order, to see if I can pick up some useful info.  We have a financial planner, but I would like to know more about what he is talking about.

  by vigilant meerkat on Fri Mar 28, 2008 at 02:30:50 PM PDT

  •  Thanks, VM

    I must admit that writing this series has been really educational for me too.  I'm glad to see you here.

    by sarahnity on Fri Mar 28, 2008 at 02:46:30 PM PDT

•  Re: return on investment

  The question was, where to place your money in order to get a stream of income later on, as in retirement.

  Taking a step back.
  Before we consider streams of income or returns on investment, we need to take a close look at the entire system which is supporting the framework of investments.
  I believe the entire system is in serious danger of collapse.  It's too early to tell.  Just the fact that the Fed keeps injecting more and more cash into the banking system just to keep it afloat.  It's now in the hundreds of billions.  Anyone who wants to preserve their money needs to be vigilant of this dangerous situation. The stock market appears volatile.  There are a lot of danger signs out there.  

  What to do?
  I would suggest that before investing any money, make sure the system will still be standing.  This would include municipal bonds which have been seen as a safe haven.  It's my understanding that almost all municipalities are broke.  Possibly the only thing that's safe would be T Bills which don't pay much in terms of interest rate, but at least the investor won't lose their money.

  Some suggestions.
  Most of the pundits are recommending we put our money into 'hard' assets, like commodities, gold silver scarce metals that kind of thing.  We are experiencing inflation, so anything that's 'tangible' will hold its value while the money supply shoots up to astronomical levels.
  Gold is expensive though; how many people can purchase a Krugerrand when gold is hovering arounf $1000 / ounce?

  Frugal suggestions.
  I'm not an expert, but I'm currently planning to teach a class on 'Frugal Living' at a community college.
  In terms of investment, this is what I recommend:
  (for the average person who doesn't have very much to invest)

  1. Silver: start collecting coins.  Some people are predicting that silver will surpass gold in terms of growth.  You can go to any coin shop, some even have bags of older coins which you can buy in bulk.  Just make sure you collect coins earlier than 1963.  Anything minted after 1963 is not silver. You can also collect proof sets.  They're not expensive and they have already gone up in value.  Silverware: make a trip to your local thrift store.  Look for silverware.  Silver is easy to spot because it's usually tarnished.  If it's solid silver, grab it quick.  Same thing with copper.  Look for bowls, vases, anything made of the stuff should go up in value.  People are currently ripping roofs off of new homes + tearing out plumbing from foreclosed homes because copper is so valuable.

  2. Gold: take a look in your jewelry box.  Do you see any gold in there?  Look on the inside, you can usually tell if it has a gold stamp. Any ring settings where the stone fell out, but it's still gold?  Hang on to it.  Even gold teeth things of that nature.  Take all of it, store in a small fireproof safe.  Put on top of your water heater & you should be Ok.  Got an old computer that's broken?  Take a look on the back of it.  Computers usually have pieces of gold which have been soldered on there.  Some people are actually making a living taking out the gold.  As gold continues to rise, this will become more and more valuable.  Pawn shops: I suppose you can go in and take a look.  But keep in mind these people know the value of gold.  However, if there are some junky looking pieces like a twisted ring setting without a stone, or a broken bracelet, make an offer and see what happens.  The point is to start building up a supply over time.  I do NOT recommend what the Hunt Brothers did, back in the 70's.  They invested millions into the Silver Market.  They believed so fervently that silver was going to go up it was a sure bet.  The only thing sure bet was that they went bankrupt....with lots of silver.  We're also going gold panning later in the spring.  

  3.  Hoarding Food Supplies.  Yes we're doing it.  We're starting to build up a supply of wheat, grains, other staples.  As prices go up astronomically (they're expected to go up 5-fold) we've bought at bargain prices.

  4. Do it gradually, even with rising prices.  The best way to do this is to plan to spend, say, $50.00 per month.  Have a lot of fun figuring out different ways to invest this money on commodities/metals.

  Good luck and remember the Small Guy is going to do better than the Big Guys.  Cuz he's smarter.  

  by Cliss on Fri Mar 28, 2008 at 02:31:12 PM PDT

  •  I'm not sure I agree with you on everything

    But if you are looking for sterling silver, check out estate auctions.  You can find solid silverware for amazingly low prices.  

    WARNING: do not try to remove gold from electronics by soldering it off.  There are a lot of toxic chemicals in there, some of which can be released and you can breathe them right in.  Not good.

    by sarahnity on Fri Mar 28, 2008 at 02:39:50 PM PDT

    •  Hi, no I didn't mean that anyone should

      do any soldering.  Just the suggestion that readers might want to hang on to the circuit board in the event of disposing it.

      Investments - you'll notice; none of the things I've suggested you can't support yourself on these ideas.  These are more or less parenthetical suggestions; coin collecting can be more of a hobby; same thing with collecting metals.

      But - for the small investor, this could be a fun & rewarding way to go.  

      by Cliss on Fri Mar 28, 2008 at 05:39:15 PM PDT

  •  Inflation is a huge risk...

    but if everything goes under, you may experience deflation. We've hit great Depression problems, and the road is pretty damn rocky ahead.

    Don't buy coins. Invest in an ETF for silver.

    The stock market is down 12% -- that's awful, not volatile.

    by RisingTide on Mon Mar 31, 2008 at 05:36:42 AM PDT