Why is silver so volatile compared to the S&P 500?
The S&P 500 represents a broadly diversified basket of stocks.  Silver is a single metal.  If all else is equal, more diversification means less volatility.  A better comparison would be the S&P 500 vs. a commodities index, or silver vs. some individual stock. Silver is a commodity. It's valuable for certain kinds of manufacturing, jewelry, and as a speculative financial instrument or hedge against the dollar. The S&P 500 includes companies which make money off of mining, manufacturing, medicine, media, technology, banking, dining, agriculture... There's a lot more variety there.
I tried direct indexing the S&amp;P500 myself and it was a lot of work. Lots of buys and sells to rebalance, tons of time in spreadsheets running calculations/monitoring etc, dealing with stocks being added or removed from the index, adding money (inflows). Etc. All of the work is the main reason I stopped. I came to realize the 0.05% I pay Vanguard is a great deal. gold is incredibly volatile, I tried spreadbetting on it.  During the month of its highest gain, month beginning to month end, I was betting it would go up - and I still managed to lose money. It went down so much, that my stop loss margin would kick in.   Don't do things with gold in the short term its a very small and liquid market. My advice with gold, actually buy some physical gold as insurance. "This sound like a very bad idea. If you invest exclusively in silver, your investment is not diversified in any way. This is what I would call risky. Have a look at index funds and ETFs and build a diversified portfolio. It does not take much time, and you don't need to let it do by someone else. They are risky too, but I see ""silver only"" as much riskier. You reduce the risk by holding on to the funds for a long time." "They don't, actually. Though in some time frames S&P 500 growth out performs S&P 500, it often lags. This is because ""growth"" doesn't refer to what happens to your account, but rather the type of stock in the index -- roughly speaking, it's the half of the S&P with the best earnings growth.  That would be great, except it's not looking for is to see if that growth is worth buying. A stock with a 20% growth rate is a great buy at a P/E of 15, but a terrible buy at P/E/ 50.  That leads to what JB King was talking about -- there's also the S&P 500 Value, which is roughly the cheapest stocks relative to earnings. Value does tend to beat the broad index over the long haul, because there's nothing like getting a good deal (note a stock can be in both the growth and value categories). This holds true with other indexes as well like the Russel 2000. All that said, you're not going to see a huge difference between S&P 500 and S&P 500 Growth. I believe this is because the S&P 500 itself leans a bit to the growthy side.   PS: With VOOG Vanguard is tracking the S&P 500 Growth Index, which is actually a thing and not Vanguard itself filtering stocks." The mathematics make it easier to understand why this is the case. Using very bad shorthand, d1 and d2 are inputs into N(), and N() can be expressed as the probability of the expected value or the most probable value which in this case is the discounted expected stock price at expiration. d1 has two σs which is volatility in the numerator and one in the denominator.  Cancelling leaves one on top.  Calculating when it's infinity gives an N() of 1 for S and 0 for K, so the call is worth S and the put PV(K).  At 0 for σ, it's the opposite. More concise is that any mathematical moment be it variance which mostly influences volatility, mean which determines drift, or kurtosis which mostly influences skew are all uncertanties thus costs, so the higher they are, the higher the price of an option. Economically speaking, uncertainties are costs.  Since costs raise prices, and volatility is an uncertainty, volatility raises prices. It should be noted that BS assumes that prices are lognormally distributed.  They are not.  The closest distribution, currently, is the logVariance Gamma distribution. "Like Jeremy T said above, silver is a value store and is to be used as a hedge against sovereign currency revaluations.  Since every single currency in the world right now is a free-floating fiat currency, you need silver (or some other firm, easily store-able, protect-able, transportable asset class; e.g. gold, platinum, ... whatever...) in order to protect yourself against government currency devaluations, since the metal will hold its value regardless of the valuation of the currency which you are denominating it in (Euro, in your case).  Since the ECB has been hesitant to ""print"" large amounts of currency (which causes other problems unrelated to precious metals), the necessity of hedging against a plummeting currency exchange rate is less important and should accordingly take a lower percentage in your diversification strategy.  However, if you were in.. say... Argentina, for example, you would want to have a much larger percentage of your assets in precious metals. The EU has a lot of issues, and depreciation of hard assets courtesy of a lack of fluid currency/capital (and overspending on a lot of EU governments' parts in the past), in my opinion, lessens the preservative value of holding precious metals.  You want to diversify more heavily into precious metals just prior to government sovereign currency devaluations, whether by ""printing"" (by the ECB in your case) or by hot capital flows into/out of your country.  Since Eurozone is not an emerging market, and the current trend seems to be capital flowing back into the developed economies, I think that diversifying away from silver (at least in overall % of your portfolio) is the order of the day. That said, do I have silver/gold in my retirement portfolio?  Absolutely.  Is it a huge percentage of my portfolio?  Not right now.  However, if the U.S. government fails to resolve the next budget crisis and forces the Federal Reserve to ""print"" money to creatively fund their expenses, then I will be trading out of soft assets classes and into precious metals in order to preserve the ""real value"" of my portfolio in the face of a depreciating USD. As for what to diversify into?  Like the folks above say: ETFs(NOT precious metal ETFs and read all of the fine print, since a number of ETFs cheat), Indexes, Dividend-paying stocks (a favorite of mine, assuming they maintain the dividend), or bonds (after they raise the interest rates).  Once you have your diversification percentages decided, then you just adjust that based on macro-economic trends, in order to avoid pitfalls. If you want to know more, look through: http://www.mauldineconomics.com/ < Austrian-type economist/investor http://pragcap.com/ < Neo-Keynsian economist/investor with huge focus on fiat currency effects" "This is a classic correlation does not imply causation situation.  There are (at least) three issues at play in this question: If you are swing- or day-trading then the first and second issues can definitely affect your trading.  A higher-price, higher-volume stock will have smaller (percentage) volatility fluctuations within a very small period of time. However, in general, and especially when holding any position for any period of time during which unknowns can become known (such as Netflix's customer-loss announcement) it is a mistake to feel ""safe"" based on price alone. When considering longer-term investments (even weeks or months), and if you were to compare penny stocks with blue chip stocks, you still might find more ""stability"" in the higher value stocks.  This is a correlation alone — in other words, a stable, reliable stock probably has a (relatively) high price but a high price does not mean it's reliable. As Joe said, the stock of any company that is exposed to significant risks can drop (or rise) by large amounts suddenly, and it is common for blue-chip stocks to move significantly in a period of months as changes in the market or the company itself manifest themselves. The last thing to remember when you are looking at raw dollar amounts is to remember to look at shares outstanding.  Netflix has a price of $79 to Ford's $12; yet Ford has a larger market cap because there are nearly 4 billion shares compared to Netflix's 52m." "The VIX is a mathematical aggregate of the implied volatilities of the S&P 500 Index components. It itself cannot be traded as there currently is no way to only hold a position on an implied volatility alone.  Implied volatility can only currently be derived from an option relative to its underlying.  Further, the S&P 500 index itself cannot be traded only the attempts to replicate it.  For assets that are not tradable, derivatives can be ""cash settled"" where the value of the underlying is delivered in cash.  Cash settlement can be used for underlyings that in fact due trade but are frequently only elected if the underlying is costly to deliver or there is an incentive to circumvent regulation. Currently, only futures that settle on the value of the VIX at the time of delivery trade; in other words, VIX futures holders must deliver on the value of the VIX in cash upon settlement.  Options in turn trade on those futures and in turn are also cash settled on the value of the underlying future at expiration. The VXX ETF holds one to two month VIX futures that it trades out of before delivery, so while it is impossible to know exactly what is held in the VXX accounts unless if one had information from an insider or the VXX published such details, one can assume that it holds VIX futures contracts no later than two settlements from the preset.  It should be noted that the VXX does not track the VIX over the long run because of the cost to roll the futures and that the futures are more stable than the VIX, so it is a poor substitute for the VIX over time periods longer than one day. ""Underlying"" now implies any abstract from which a financial product derives its value." I'm all-in on hard silver, a small portion is stored at my house for emergency expenditures and the vast majority is in a high-security vault in Canada. That was actually the cheapest place I could find for long-term storage and insurance, which happened to be off-shore. It could turn out to be beneficial to be off-shore though. In the 1930s gold became illegal to privately own its very possible they could do the same this time, although they didn't in 1979. Oil is too high in volume to reasonably store. Gold isn't as undervalued as silver, which I could spend a full day talking about. But to sum it up in a few points: there is less silver than there is gold, gold has a premium for jewelry which will likely go down in a crash even though you will still see gains, silver is the second most used commodity besides oil, less people are in the know about it, silver prices were actually higher than gold a few times in the past century, simply measuring the dow in silver will show it's further below the historical average compared to gold. I'll stop there, but I could go on though on silver if people want. Real-estate is still very expensive from the 2008 recession, traditionally mortgages are $1.05 per dollar you would spend on renting the same property. Currently real-estate is at like $1.25+ I believe, It peaked at about $1.95. I rent, to save money, which you can spend on other assets.  If one's willing to move to another state for lower taxes, they definitely should. Employment is going to be harder to come by, and they should get as much out of it as possible as they can. If they don't save enough, they could end up just using their entire savings during the whole thing if they can't find a job, in which case at the end you'd never know they knew it was going to happen.  Overall I don't think this crash is going to be like the great depression. I don't feel compelled to store food and buy a generator or anything. I believe the living will be *easier* than it were to live in the 90s for those who are invested in assets. Everything is going to be on sale, meanwhile their wealth will be increasing. Depending on how much they own it could be increasing faster than they need to spend it. Sounds like the life to me. But with that said those without real assets, especially the lower class, will be unemployed and living on food stamps. Perhaps even the food stamps making more people leave the dollar and the economy. This actually might not be a prediction and is what happening already. But I don't believe anybody, in america at least, will be starving. In the 30s we had not mastered industry farming yet and we had the *dustbowl* to make things worse.   Crime though, I'd own a gun. The protesters are here already, and I think we are just passing the half-way point right now, they will get angrier.  I don't know enough about taxes to know the best country or place to store to combat taxes. Maybe someone else can chime in. I'm in canada to avoid high insurance and storage fees.  And for careful selection of primary residence, In the long haul I'd rent a small apartment, as small and cheap as possible. In a safe neighborhood, but not so much secluded that a single grocery store or gas station going out of business could ruin it. VXX VZX XVIZ and there are plenty others correlated to market volatility if you want the wildest hedge, use VXX, it is also the most liquid I don't even think that much is true, in a downturned market we see deflation. Things go on sale, prices drop, that's deflation. But the elephant in the room is that the gov't can't let deflation happen or their debt becomes harder to pay off. So after/during a downturn the government goes into hyperinflation mode.  To me, gold/silver aren't a hedge against the dollar they are a hedge against the inevitable decline of the dollar which isn't going to stop until we change monetary policy.  Graph the dollar's value in the past 100 years, it's the biggest crash in history. Now ask yourself if the dollar was a stock, would you want to own it with that record? 100 years of declination. Sell your dollars, find a real currency. I understand your point now. When I first read your comment, I gathered that you were making a prediction of a 50% drop (thus my comment about the fool's errand of making predictions).  I now see that you were commenting on the high price volatility of gold and silver. "1) link? 2) It doesn't matter if they can or do, what matters is if they are *investing* (not trading) in it *more* than banks are investing in businesses. If that is the case (it is) then businesses as a whole will see the inflation first, and commodities will be playing catchup the entire time, but mostly when the investments hit recession.  I will invest in the market again after they lose their mal-invested value, In historical terms the best time was to invest in them was 1980, 1938 and 1900, and the best time to get out was 1929 1960's and 2000. But to bet against them right now, with the dollar, is meaningless because the FED is deflating the currency as they go down, so it's like running on a treadmill. By holding silver I am essentially short the market, only difference is instead of holding a devaluing currency (cash) I'm holding a real money which is increasing in value.  There's nothing simpler than ""investing"" in commodities for the long-term, people lose when they are making monthly/daily trades in them. Anyone who bought and held on to gold in 2000 did it for $300, and they've made infinitely more than the majority of people investing in blue chips (because they've lost value) and much more than those who invested in bonds. And that trend isn't going to stop unless the government lets the dollar deflate in which case the dollar will come to gold instead of the other way around. Until they are in equilibrium again. Historically the dow has an average of being 2 ounces of gold, peaking at 50 and trophing at .5. If it hits .5 again like it has everytime this occurs in the past. Then either gold will be $20000 or the dow will be 4000. You pick." Here's the 2009-2014 return of the S&P 500 (SPY) vs. Vanguard FTSE ex-US (VEU) (higher returns bolded) Another argument for them is their low correlation to U.S stocks.   Looking at history however, I don't see it. Most times U.S stocks have   done badly, foreign stocks have also done badly. Looking at the last 6 years (and current YTD), 1 in 3 years have international stocks doing better.    I invest a portion of my investments in international because they aren't well correlated. "In theory, the idea is that diversified assets will perform differently in different circumstances, spreading your risk around. Whether that still functions in practice is a decent question, as the ""truth"" of most probability based arguments for diversification rely on the different assets being at least somewhat uncorrelated. This article suggests that might not be true. Specifically: The correlations we note among industry sectors are profoundly and dysfunctionally high. and  Gold and silver traders have gotten too used to the negative correlation trade with stocks. This is, in fact, an unusual relationship for precious metals tostocks. The correlation should actually be zero."