Should you hold PM's whilst you are in debt?

[ChrisSilver]

If you hold debt whilst holding PM's (although dependant on the type of debt) you are effectively leveraging your position. This may be beneficial or disadvantages depending on the way prices go.

I wouldn't recommend anyone to use debt to finance precious metals purchases, as you shouldn't be investing more than you can afford to lose and if you are taking on debt to do this, can you afford? Also, averaged out in the long term the increase (if there is one) in the price of the precious metals might not be more than the interest charges on the debt.

If you take on debt to buy PM's then a drop in prices will exaggerate your position.

Do you think that it ever makes sense to use debt to purchase PM's?
 

[Agpanda]

To me it´s seems crazy to buy PM´s with debt

I have a loan on my house, but not more than I can afford even if I loose my job

My PM´s buys is my hobby, and I am lucky enough to have some extra to spend atm.

If my money stop coming in, then I stop collecting for the moment

[Roy]

A very important thread!

I've made my position clear. I don't believe one should hold PMs whilst they are in debt. It doesn't mean that I'm right.

To hold a non income producing asset while paying an interest accruing debt seems ludicrous to me. 

Debt is a figurative and literal killer.

I despair sometimes. There was even one guy buying PMs with his student loan! 

 

 

[HighlandTiger]

I bought a load of the Nordfrim Brits on my credit card as I didn't have any spare cash. Flipped them for a mega profit and repaid back my credit card.

So yes. There are times when going into debt buying pms is a good idea.

[Roy]

A good example HT, but the OP says 'hold' not flip 

[shemyaza]

Roy, I have a car loan which is debt at 0% interest with 1 year left to pay. If I have an inversely depreciating debt is that a rising asset to me? It is in effect a negative interest loan. It is in my opinion the only type of loan you should look for but be mindful of the payments. Roy just to add, I have the remaining amount of the principal in Dividend Stocks while payments are made using Income & Dividend income. Also should you pay into a Pension while holding debt, when Pensions have made negligible profits (I believe 1% in the last 10yrs) whilst Metal has appreciated over 3x itself. I wish I had used my Student Loan in the 1990's to buy PM's I'd have made an absolute profit.

[Danny-boy]

Personally, I couldn't care less about what other people think about having debt and holding PM's.

I have a mortgage, and I stack silver.

So what?

I know I wouldn't use my silver money to pay off my mortgage, I'm just not wired that way.

[HawkHybrid]

over 100 years a sovereign(£1) rose in value to ~£200

£1 loan would have cost: at 5% £131, at 6% £340.

so the opportunity evaluation is on average if you can

get a loan for 5%pa and under then it's a risk that might

be worth taking. if the loan is 6%pa and over then the

odds are stacked against you. each situation is unique

and should be treated as so. don't be too quick to discard

an opportunity just because it involves taking on debt.

just be careful and realise that taking on debt is taking on

extra risk.

 

HH

[HighlandTiger]

49 minutes ago, Roy said:

A good example HT, but the OP says 'hold' not flip 

I held the coins for over a month, and had to pay a bit of interest on my credit card until it was all paid off. However I made a nice tidy profit, which I would not have done if I followed the mantra of never going into debt to buy PM's.

If I "knew" that pm's were going to increase ,lets say more than 10% in a month, I would have no hesitation in maxing out my credit cards to buy pm's and selling them after the rise. Like anything in life it's a risk. ,

It's no different to any retailer buying a load of cheap stock of any product on a credit card, and selling it at a profit. It's all about factoring in the interest costs into your bottom line.

A rough credit card yearly APR is about 30%, In the last year silver has increased by 61%. If I had maxed out my cards and bought a load of silver a year ago, even when taking into consideration the interest costs, I would have been quids in.

You just have to play the game.....

[ApisMellifera]

I agree with HT.

Buying PM on credit to flip (in the short term) can work well for you.

If you buy PM with a credit card, the credit card fee(s) and/or interest will need to be added onto the 'premium'.

BelangP made a good video how credit card purchases can impact your investment.

 

 

[Roy]

Fair enough! I'll concede that I am wrong and you are right.

(but I still wouldn't hold PMs if I were in debt).

[Danny-boy]

Fair enough! I'll concede that I am wrong and you are right.

(but I still wouldn't hold PMs if I were in debt).

Roy, you putting mortgages into that mix too, or just short term debt?

Most people don't pay off their mortgage much before retirement these days.

[SilverPirate]

If i lost my job and got behind with bills thats bad debt, i would sell even at a loss to give me peace of mind and a restfull nights sleep.There is some good debt like a mortgage, i have never owned a credit card and never will. If you were just dipping in an overdraft each month due to a crap wage but ticking over i would keep the metals as the safty net for illness or job loss.A little debt is not enough a consistent debt that wont shift has to go.

[Roy]

Danny, good point.

Yes, I am. Now, I realise things are different today than they were before. As a young man, it was a challenge to pay off your mortgage in your 40s.

It's such a personal thing, I wish I hadn't brought it up now.

When will people realise they are slaves to debt?

Guys, carry on. I'm an old fool.

 

[ChrisSilver]

1 hour ago, Danny-boy said:

I have a mortgage, and I stack silver.

This is why I said "(although dependant on the type of debt)" because mortgages are relatively low interest and as long as there are no major natural disasters to the climate or UK economy then in the long run the properly should, in general, increase at least inline with the interest on the mortgage. And historically in most cases far greater capital growth.

Debt in itself is not bad, the poor use of debt by people who misunderstand finance is.

[Danny-boy]

Danny, good point.

Yes, I am. Now, I realise things are different today than they were before. As a young man, it was a challenge to pay off your mortgage in your 40s.

It's such a personal thing, I wish I hadn't brought it up now.

When will people realise they are slaves to debt?

Guys, carry on. I'm an old fool.

 

I'd put you on the opposite end of the scale to a fool Roy, my opinion.

Things are different now, but opinions are difficult to change.

If we are talking credit card debt and catalogue / store card accounts, then I'm with you all the way!!!

I have a credit card, but only generally for work expenses, and sometimes the odd transaction where a little more security is required.

I earn more than I spend, but I do have a whopping mortgage.

Buying PM's with a card is generally a fools game, although I see HT's point but that was uncommon, somebody selling coins for half their value - that's why we (TSF) cleaned them out [emoji1]

[Cornishfarmer]

Personally I've with @Roy I wouldn't buy pm's if I had a debt.   I'd want it paid off as quick as possible.   I'm just too tight to borrow and hate to see a bank profit out of me.     Just a personal choice neither right or wrong

[richo]

Unsecured debt, like loans and credit cards then no. But most people have mortgage debt so I think that can be treated differently. 

Nobody should have the gamblers mentality that borrowing £100 to try to win £200 is a good idea.

I like the hobby, and yeah it's an investment too, but I only put in what I can afford to lose completely. With that mindset, any increase is a bonus, and decrease is prepared for.

[Murph]

On 30 July 2016 at 21:10, HighlandTiger said:

 

It's no different to any retailer buying a load of cheap stock of any product on a credit card, and selling it at a profit. It's all about factoring in the interest costs into your bottom line.

A rough credit card yearly APR is about 30%, In the last year silver has increased by 61%. If I had maxed out my cards and bought a load of silver a year ago, even when taking into consideration the interest costs, I would have been quids in.

You just have to play the game.....

 

The large increase in pm prices only happened just after the brexit result.  The chances that you could have made a profit if that hadn't happened would have been much, much lower and nobody could have reliably predicted that result given how close the voting actually was.

I don't mind gambling a little but have always given myself a stake of x thousand in cash to work from and walk away if I lose it, just like I wouldn't dip into my savings to buy Nordfrims stock of brits even if I thought there was a good chance I could sell them on for a profit.  I give myself an allowance for pm and stick to it and only use ccs for protection.