Following are the core axioms, that if practiced and taken to heart, will result in your having NO REGRETS in your precious metals investments:
1. ALWAYS REMEMBER WHY YOU CHOSE TO BUY GOLD AND SILVER IN THE FIRST PLACE! This is actually the most important axiom on the list. This may seem so basic that it need never be mentioned in the first place, right? Well, too many precious metal investors have forgotten over time what led them to originally buy gold and silver.
Most buyers will initially cite issues such as monetary and fiscal policy, domestic politics, reserve currency status, debt and deficit levels, world affairs, reduced freedoms and other issues that concern many of us. These buyers assure me that while appreciation would be nice, they go on to state that they are aware the metals could decline in value, even substantially, but either a rise or fall in the price does not affect their purchase motivation.
They want to own metals in order to protect against inevitable defaults, inflation, emergency spending currency and to convert paper money into a private, tangible form not easily tracked.
Fast forward, and the metals prices have risen. Now they are very happy. Their investment has appreciated, their net worth has grown and all the factors cited above are covered. What a prudent and prosperous investment!
Fast forward again. Now prices have sold off significantly, and the metals buyer has either lost much of his or her gain, or the price is below their initial entry point. What was a prudent purchase has now become a “losing” investment in the buyer’s eyes. “Did I make a mistake?”, they ask themselves.
Metals are now at bargain prices, but instead of buying more at tremendous sale prices, there is hesitation or no interest. “Why would I want to compound a mistake?”, they ask themselves? When other products or items go “on sale” we get excited and are motivated to buy. Not the case with precious metals unless you are a seasoned buyer that has weathered prior market price corrections.
So, ask yourself, why did you buy in the first place? Are those reasons still valid? Concern yourself less with the cost of the metals and more with the peace of mind they provide. And when they go on sale, buy more if you are able!
2. GOLD AND SILVER ARE INSURANCE FIRST – PURE AND SIMPLE! In their purest form, precious metals are insurance, unless you are buying gold and silver purely for speculation or collecting purposes.
3. IF YOU ARE GOING TO BUY RARE COINS – BE AWARE! Direct marketers employ salespeople who are typically compensated on straight commission. Gross margins in the bullion business are very slim, typically 1 to 3%. Rare or graded coins on the other hand, can carry margins of 25% to 100% or more. Hence, there is a strong motivation for the commissioned salespeople to move buyers toward rare and graded coins (whether they meet their investment objectives or not!)
Don’t ever let a salesperson talk you in to buying numismatic/rare/antique coins for ANY reason other than serious collecting or speculating. They are not so much a precious metal item as they are a collectible in line with artwork, investment grade diamonds and other rarities. The profit margins are very large and commission driven. As a result, they should occupy a very small percentage of your metals portfolio if you are not a collector or speculator.
4. PERSPECTIVE AND BALANCE. For the foreseeable future, when other asset classes like stocks and real estate are doing well, the precious metals may languish. Historically, that’s what they are supposed to do. Remember, their primary role is that of insurance – insurance against any and everything that can/could go wrong. You buy insurance before you need it, not when you need it (think of a house fire). Presently, there is an abundance of easy money through overt monetary expansion as well as covert electronic, intra-government, inter-Central Bank agreements and trillions of new off balance sheet disbursements.
This is the list of simple “DON’TS” that seasoned investors have taken to heart:
1. Don’t ever buy gold and silver from a pawn shop – you are NOT getting a fair deal
2. Don’t let a salesperson talk you in to buying bullion that is not low premium and easily authenticated
3. Don’t ever buy gold or silver on leverage
4. Don’t buy gold and silver without first understanding the full cost (the “all in cost”) that includes product cost, insurance and shipping
5. Don’t ever buy from a dealer that won’t buy back any item they sell you at fair market value
Avoiding the risks above positions you to begin investing with the wisest investors.