This morning, silver briefly opened up well above $48 an ounce before settling around $46.50 or so.

Individual investors generally pay a few dollars per ounce over spot for investment grade silver.  This could be pushing them towards the assumed resistance point of $50 per ounce and causing some resistance to purchase more.

In addition, the $50 per ounce price may also trigger some sell offs as well by both large and small investors alike.

In my personal opinion, silver and the commodity price rises as of late are caused largely by inflation fears so the rise in prices are to an extent justified.  I say to an extent because it would appear silver is rising at a significantly higher rate than most if not all other commodities including its close brother, gold.

Only time will tell if the wild silver rise is in line with current investors or if the market has been severly overbought.  Back in the 1980’s, silver also went on a intense rally reaching a high of approx. $50 per ounce.  We haven’t quite hit that yet.  Including inflation, we haven’t come close to matching the silver run up in the 80s.

It’s odd.  Every financial adviser I’ve ever encountered swears up and down that their actively managed fund will out perform index funds hands down.  However, statistics show otherwise.  Statistics show that index funds out perform managed funds 80% of the time.  On top of that, of the 20% of managed funds that do out perform the index funds, how is one supposed to know which managed funds, or more importantly, WHEN the managed funds will be in that top 20%.

Lets take a quick look at the differences between actively managed funds and index funds.

Actively Managed Funds

The name is pretty obvious with actively managed funds.  It simply means that there is an individual or group of individuals that watch your funds.  They buy and sell based on their professional expertise.  Expenses are typically much higher than index funds because someone is actually “watching” your money.  Fees can be 1.5% or even higher.

Index Funds

Index funds are simple.  Index funds have literally a spread of all stocks on the market.  A little of this, a little of that.  Index funds do not have anyone watching your money.  As the market fluctuates as a whole, so do these funds.  They are bench marked against some of the biggest indexes like the DOW, S&P 500, Nasdaq, and many more.  Fees for these funds can be as low as .02%.

After reading the difference of the two types of funds, you’re probably thinking you’ve got to be kidding me!  I can let this run on auto-pilot and do better than the professionals?  The short answer is yes, or at least 80% of the time.  Remember that even though 20% do out perform the index funds, it is nearly impossible to tell which funds will, and even more difficult, when they will.  Heck, even if you do win, the margin of difference is usually so low the fees eat up the rest of superior gains.

In a nutshell, stick to index funds for the long term.  These funds are available in any style, conservative, moderate, aggressive, you name it.  Keep in mind, you will be investing for 20, 30, or more years.  Stick with your plan.

Stocks are simply a piece of ownership in a company.  While usually not a very big chunk of ownership, you can own a piece of any publicly traded company for a small price.

Companies generally start out as private companies, mom and pop if you will, but on a larger scale of course.  At this phase, most investors (Average Joe’s) cannot buy into the company via a stock.  When the mom and pop company starts to grow and needs more capital (Cash!) to increase production or open more stores, they offer an IPO.  An IPO is an “Initial Public Offering.”  This is the first time a stock will be available for the company in question.

So why buy a stock?  Stocks, in general, are the fastest way to grow your investment.  In simple terms, if the company you own the stock in is doing well, the price of the stock goes up.  Of course there are many factors that go into the price being driven up or down.  The current state of the economy, expected future growth or shrinkage, industry trends, etc.  Over the stock market’s history, the average return is 11%.  Keep in mind that is over a very long period of time.  The last year or so has shown us that this is not constant and you should be prepared at any time for extreme losses if you are in higher risk stocks/mutual funds.

Roth IRAs are great ways to save for retirement.  While your contributions are after tax money, they grow tax free, even when you withdrawal during retirement.

This the 2009 tax year, you can contribute up to $5,000 in your Roth IRA.  The greatest advantage of the Roth IRA is all gains are tax free.  You have complete tax free growth.  The only downside is, again, you contributions are your money after it has been taxed.  The contributions are not tax exempt like your 401k.

Since the Roth uses after tax dollars for contributions, this helps you diversify your portfolio since your 401k will be taxed upon withdrawal.  Since there is no way to tell what tax rates will be like when you retire, having both a 401k and a Roth IRA gives you the best of both worlds.

One of the other benefits of a Roth IRA is you do not need to distribute your account once you reach 70 1/2 years old.  The account can continue to grow if you don’t have a need to withdrawal the funds.  So in a nut shell, you can keep your money in the tax free growth account as long as you like.

With Roth IRAs, you can also withdrawal funds without penalty, but only your contributions apply.  Only gains are penalized for early withdrawal.  Also, the funds must be held for 5 years to be eligible for withdrawal.  Example:  You contribute $3,000 to your Roth IRA that grows to $3,500.  You can withdrawal up to $3,000 (You contribution) without penalty at any time, after 5 years have past.

Roth IRAs do have some eligibility requirements though.  In order to be eligible, your adjusted gross income must not exceed $105,000 and for married couples $166,000.

For 2009, the maximum IRA contribution is $5,000 unless you are over age 50.  If you are over age 50, you qualify for contributions of up to $6,000.

Certificates of deposit are sold by banks.  They are more widely known as CDs.  Typically, CDs are low risk but generally low returns.  CDs are great for keeping cash in a safe place where you won’t need it for months or years.  CDs carry a commitment.  You cannot withdraw the funs for a predetermined amount of time.  The duration varies quite a bit, anywhere from short term one month CDs up to 5 years is common.  Usually the longer the time frame required, the higher the interest is.  Unfortunately, if early withdraw is required, a penalty will likely be assessed.  All gains from CD accounts (unless in a IRA) are taxable.

CDs are very safe investments, about as safe as they get, in fact.  CDs are FDIC insured providing your bank is FDIC insured.  The predetermined rate the bank gives you is guaranteed.  If rates slide while you are in the CD, you are locked in at the original rate.  On the contrary, the same is true if rates rise.

Some common CD types are:

Traditional CD:  A predetermined interest rate is paid over the predetermined term, or length of time.  When the term is up, you can remove all funds plus interest or renew the CD at most current rate.

Bump Up CD:  Basically, these are the same as traditional CDs.  The only difference is you are allowed to contribute additional funds usually once, in addition to the opening amount.

Liquid CD:  This type of CD account allows you to withdraw funds before the maturity date.  Since you have more freedom, it comes with a cost, a lower interest rate.  The rate will still be higher than a typical money market account though.

In addition, most of the above accounts are available at your local branch or online.  I have found that online accounts usually have much better rates than local banks.

CDs are great investments.  For people nearing retirement, they are ideal due to their security.  CDs are guaranteed and will never lose money.  CDs can also be used for your emergency funds as well.  Simply pick a shorter term.  If needed, you can withdraw funds early, but the penalty will be assessed.  The penalty is usually a few months interest.  However, since this is your emergency fund and it should only be used for true emergencies, hopefully the interest has paid you far more than you will lose for early withdraw.