Finance and Economics > Investing and Saving

What kind of silver should I invest in?? Newbie

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Cooter Brown:

--- Quote from: joeinwv on October 26, 2010, 12:51:08 PM ---However, metals are not really an investment as much as protection against inflation.

--- End quote ---

-This!

Know your objectives and pick your vehicles accordingly.

As an "invesment", I bought SLV, a silver ETF, when it was in the $16 range. Thursday's dip hit my trailing stop and I bagged a nice gain. I won't be buying back in unless it drops back to at least $18.

As a PM holding for long term hedge and/or SHTF, I continue to buy small quantities in the form of junk or Eagles regardless of price as funds allocated for PM's allow.

Two different vehicles for two different objectives.

18C Troll:
Just in case anyone is checking Silver prices are currently very low at $15/oz. as of 7 March 19.

The Professor:
My basic strategy for investing in precious metals is somewhat convoluted and, frequently, contradictory.

In as small of a nutshell as I can sort of make it:

I invest in gold and silver for two primary reasons: Post-event survival and wealth storage.  They both are about equally important in that I do not expect a major disaster to happen that destroys the monetary system, but the problems that would arise after such an event severely influence what and how I buy.

The vast majority of what I buy is state-issued 1 oz coins in Silver and state-issued 1/10th, 1/4, 1/2 and 1 oz. coins in Gold.  The operative words here are "State Issued."  This means they are issued by the mint of an established country.  In my case, coins from the US, Canada, Mexico, Great Britain, Austria, China and (just because) South Africa (I like saying I have Gold and Silver Krugerrands).

To me, precious metals coined by major states adds a level of creditability (i.e., trustworthiness) in the product that you simply can't get from private mints, especially to the average person.  The vast, VAST majority of people do not know of Republic Metals, Englehardt, Geiger, etc.  Were I to present them with a specialty round or 1 oz bar, they couldn't tell me whether the private mint was trustworthy, or not.  Most wouldn't even  know how to test a metal for what it's content is.

And to me, this is the major problem with Gold and Silver.  They have become so uncommonplace that the average person wouldn't recognize the value in an American Gold Eagle.  I have verified this, myself, by talking to some of my daughter's friends and offering them one of two choices if I were to give them a gift.  The two choices were a single 1 oz Gold Eagle or a $100 bill.  Of the five times I've done this, every single one of them looked at both, saw the words "50 Dollars" on the gold coin and immediately voted for the $100 bill.  I wish I were kidding, but I have actually had difficulty trying to explain that the "50 Dollar" coin was worth MUCH more than the $100 bill. 

"But why does it say "50 Dollars" on it?"  or, my personal favorite "Yeah, but I'd have to melt it down to get the gold, right?"

And these are <sigh> college-educated young people.

In an extended disaster that severely interrupts or damages the financial basis of the country, there will have to be a lot of education just to get people understanding why precious metals are valuable.  Sure, there will be some who already understand, but the majority will not, at first.

This is why I also maintain a comparatively small percentage of "junk silver."  The math and details that go into determining the amount of silver in a 1962 quarter or mercury dime almost makes it sound like some sort of con-game to the  uninitiated.

Throw all of this into the pot AND add in private mint issues?   Hell, here's one for you:

I recently found several rolls of the old NorFed Liberty Dollars.  These were 1 oz silver pieces that once were very heavily being promoted as an alternate form of money over "Federal Reserve Notes."  I won't go into the whole sleight-of-hand crap that was being done, but let's suffice it to say that many were struck with  "$10" and later ones were struck with "$20" and I believe I remember even seeing some prototypes of the "$50"-stamped coins being offered out.  How do you explain to a person who doesn't understand the history of the Liberty Dollar why three coins, all weighing 1 oz of .999 fine silver yet each with different declared values all have the same actual intrinsic (determined by weight of the precious metal rather than collectability) value?

I do have quite a bit of the junk silver, but that's because when my wife and I were younger (back in the 90's), we would often cash our paychecks in for customer-rolled dimes, quarters and and half-dollars, sort through them, harvest all the pre-64 coins, and turn them back in for cash.  We stopped doing that around 2000 because we could almost never find any older coins.

Now we just invest a set percentage of our income into State-issued coins.

So, what do I recommend to someone just beginning? Well, keep in mind that I am not a Financial Advisor.  I don't know your particular situation, so I can only tell you what I tell my daughter:

First, save up three months worth of cash.  Determine this by adding up everything you pay out to live (not fun stuff, just bills, food, etc.) for three months.  Put that into $20's. Don't touch it.  After you get that, take 10% of your after-tax income and invest it in Silver Eagles.  If it means you buy them one at a time, then that's what it is.  Buy it.  Period.  Put them back every time you buy one.  Right now, I can get Silver Eagles for $17.50 - $18 at a trusted coin shop.  If you can buy one coin a week, do it.  In a year, you'll have over 50 ounces.  In lean times, don't buy them if it means you can't put food on the table, but if you can. . .do it. Consider a cap on what you'll pay for your precious metals.  For example, we stop buying at around $25 an ounce, but we still put the money aside for when it drops (it will drop, again), then use that money to catch up.

In our case, when we reach a certain point in silver purchases, say $1500, we then switch to gold.  We would then buy 1/10th ounce coins to catch up to the value of the silver we bought.  Then we switched to 1/4 oz, then 1/2 and then 1 oz coins.  Then we started all over again with silver coins.

Rule #1: once you've bought them, forget about them unless you see a massive spike in prices.  Twice, I've seen Silver go above $44 an ounce.    We liquidated every ounce of silver we had, set the money aside and rebought when silver dropped below $20 some time later.   Gold hasn't done THAT well, but use your best judgement.

But those coins are not to be used unless it's in an emergency.  Sadly, I can't convince my wife that MY emergencies actually constitute a REAL emergency.

Rule #2: Make it a habit.  It is something you do.  Most people I know spend way more than $20 a week on specialty coffee or McDonalds. 

Rule #3: Find a reputable coin dealer.  This is where you'll get your best deals.  Those $18 Silver Eagles I spoke about?  I saw some  jackwagon at a recent gunshow selling them for $22.  Earning the trust of a good coin dealer often gets you the "bro discount."

How much is enough?  That's up to you to decide.  In my case, thirty years of buying has left me with a significant amount.  But, I'm getting old.  As far as I'm concerned, if the S doesn't HTF before I die, my wife gets it or our daughter will. 

Just an opinion, worth exactly what you paid for it.

The Professor

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