Business Pundit

Several months ago, I decided to invest in metals. Gold was too expensive. I was unfamiliar with the other metals people invest in (platinum, palladium, etc.), so I decided silver was the next best thing. The silver market is volatile, but has performed well since 2004 (I invested before the recent dive in price).

I found a couple of options for investing in silver:

1) Buy coins or jewelry. As someone who tends to misplace things, I don’t want to deal with a safe deposit box (which requires a key, which I may lose) or a stash at home. Finding a buyer for the coins, once I’m ready to sell, also sounded like a pain.

2) Buy shares of silver stock. This instinctively made me wary (paper is not silver); when I read that silver stock isn’t backed by actual silver, I balked.

3) Buy bars of silver or gold locked away in a vault in England through the Internet through a banking website called GoldMoney. This sounded odd at first, but the more I looked into it, the more legitimate it appeared. They store insured and externally audited metal for you, while you buy and sell over the Internet. It’s real metal, not stock or paper, and access is easy.

I went for GoldMoney. I decided how much to invest, filled out GoldMoney’s entire tedious application (which requires notarized documents and a personal letter from your bank), stuffed it in an envelope, and took it to the post office.

After weighing the envelope, the postal clerk looked confused. “This says Jersey, British Channel Islands. What country are they in?”

“Great Britain,” I offered.

“Where in Great Britain are the islands?”

“The English Channel?” This time, I was guessing. I told the postal clerk to give me the application back. I didn’t want it sent unless I knew it would arrive in the right place.

Back home, I looked up the British Channel Islands. They’re self-governing bailiwicks, or territories, of Great Britain. Besides tourism, the isles sustain themselves from financial services.

Translation: The isles are an international tax haven. Was I getting myself into something illegal?

I couldn’t find a clear answer. According to Knowledge@Wharton,

…many tax shelters are considered acceptable. The line between proper and improper shelters is so unclear that the IRS uses terms like “abusive” to characterize unacceptable shelters rather than calling them “illegal.”

Does investing in a metal located in a vault in London through a bank operating in a tax shelter count?

I couldn’t figure it out.

Lesson: Look at the location of an investment before filling out all the paperwork.

I put my silver investing on hold, for the time being, because I’d rather not deal with the IRS more than I already do. Anyone know whether this kind of investing breaks any laws?