Robert Kiyosaki on Why Gold and Silver Aren't Good investment

Why Gold and Silver Aren't Good Investments

Conspiracy of the Rich

The 8 New Rules of Money

by Robert Kiyosaki

Online Exclusive Update - #87
  May 16, 2011

Why Gold and Silver Aren’t Good Investments

For years, I’ve advised people to buy gold and silver, especially up to the year 2010. As you may know, gold was approximately $275 an ounce in 2000, and by 2010, gold was over $1,300 an ounce. Silver has been the better of the two precious metals, starting at below $3.50 an ounce a few years ago and reaching a high of approximately $40 this year.

Yet, gold and silver aren’t the best investments for the following reasons.

Difficult to leverage

With real estate, my bankers will loan me 70 to 80 percent of the purchase price. Even though gold and silver has gone up, few bankers will lend you money to invest in gold and silver.

A banker may lend you money for gold and silver you have in your possession, pledging it as collateral against your loan, but most will balk at the idea of borrowing money to speculate in gold and silver.

No cash flow

Gold and silver don’t produce cash flow…for most people. If you’re sophisticated, there are ways to have your gold and silver produce cash flow, but if you know how to do that, you don’t need gold and silver.

Taxes are high

As you know, there are two types of income from investments: capital gains and cash flow. Most novices invest for capital gains. They hope and pray their investment goes up in price. For example, they hope their stocks go up in price or their home goes up in value.

Cash flow investors invest for income on the asset. For example, they invest for cash flow from their real estate or business, dividends from their stocks, or interest from their savings or bonds.

Taxes for real estate investments are the best. For example, an investor can pay zero in taxes for capital gains and for cash flow. Taxes on capital gains for stocks are 15 percent for long-term gains and 30 percent for short-term gains (investments held for less than a year). This is one reason I prefer real estate instead stocks. I’d rather not pay taxes to the government.

The worst taxes are on 401k plans and savings. The income from these investment entities are taxed at the highest tax rate, ordinary income, the same tax rate for employees.

Taxes for capital gains on silver and gold are 28 percent, which is higher than 15 percent on stocks and zero percent for real estate.

Once again, the reasons why silver and gold aren’t the best investments are:

1. Difficult to leverage
2. No cash flow
3. Taxes are high

On the flip side, gold and silver is an easy investment, especially when the Fed is printing trillions of dollars.

But, if the Fed stops printing trillions of dollars, gold and silver may become the next price bubble to crash…but I doubt that will happen.

If the Fed stops printing money, there will be a giant crash causing a tsunami of pain and destruction. Cash will become king…and so will a gun.

I still believe your best investment is taking courses and investing in your financial education. Regardless if we crash or go into hyperinflation, those with a sound financial education will be better off than those who are counting on the government to solve this financial crisis.

Thank you for supporting COR.

Robert Kiyosaki