Gold and silver are probably 2 of the most popular investments amongst people who doubt the economy and don’t trust the banking sector, those are people who prepare for higher inflation and want to preserve their wealth and make good profits.
I’m one of those people who believe gold and silver should be in your investment portfolio if you really want to be smart about your money, your savings and your future. But that doesn’t mean you can’t make stupid decisions when you invest in those assets.
In this article I will try to explain to you with relatively simple words the pros and cons of investing in gold and silver. Also what is the difference between investing in precious metals and investing in digital currency (like bitcoin)? What is the risk of those investments? What you should expect and how not to become a complete moron?
So how risky is to invest in gold and silver?
This week (April 10-17 2013) gold and silver dropped significantly in price. Gold collapsed to $1339/oz at some point while silver went down to a little over $22/oz. These prices scared the average investors. The ordinary folks who have believed that gold and silver are safe and will only go up.
Some of those people will not invest even a cent more in precious metals and who knows they might have sold their metal out of panic. They have lost, no doubt.
The good news for them is that they haven’t lost everything. They’ve probably lost about 20-30% which is really a lot for gold, silver and the other so called safe investments, but it’s really nothing compared to the possible losses of other investments where you can lose everything and more. So gold and silver aren’t that risky considering that the stupidest investors lose only 30%.
Those are the average investors and they usually get screwed up because there is a risk in being average. It’s when you don’t understand what you are doing, you don’t know what to expect and you let emotions control your reactions and decisions.
There is a very popular tip to the average investors which says “Don’t be average”. Please use it from now on.
If you have sold your gold or silver because of the pullback, you are an idiot.
Sure when you have a good gold or/and silver position it’s not really pleasant to see them collapse that much and you lose patience, but that’s part of the process and you have to deal with it.
Where some people see problems, other see opportunities. Actually we tweeted that gold and silver are on sale a couple of days ago:
Gold and silver are on sale!
— Bitter Bananas (@bitterbananas) April 15, 2013
When the local groceries store puts products on sale with good discounts people rush to buy, because they know they get same value for smaller price. But for some reason when investment assets are on sale people panic and run away.
Gold and silver will never go to zero
Precious metal like gold and silver will never go to zero. There is no debate about that. They are too valuable commodities. So from that point of view the risk to invest in gold and silver is less compared to the risk of investing in Bitcoin or paper assets for example, where there is a chance of total loss.
Gold and silver are manipulated markets
This increases the risk but also creates opportunities for late comers. Market manipulations delay and scare, they don’t determine.
Pros and cons of investing in gold and silver:
- Relatively safe assets
- Store of value
- High potential capital gains
- Hedge against inflation
- Easy to buy and sell
- Difficult to move across boarders
- No cash flow
- Capital gains tax (in some countries)
- VAT (in some countries)
Some quick points about investing in gold and silver:
- Don’t buy paper gold or silver (GLD, SLV). Get physical.
- Don’t go all in. You still better balance your portfolio with other assets.
- Be patient, don’t panic and analyze what happens
- Buy legit coins and bars from legit sellers
It’s not that risky to invest in gold and silver. You can store them in private vaults for very reasonable prices. The world economy is getting worse. Trust in banks and governments is declining. Some very big countries are buying gold. And people don’t realize that those precious metals are not unlimited.
Almost 2 months ago I’ve published an article about gold and silver called How Relevant Is The Debt Collapse Video By Mike Maloney About Gold, Silver And The Economy. In that article I basically commented on an old video by the wealth cycles expert Mike Maloney about the debt crises and the gold and silver opportunities. My views haven’t changed. The fundamentals are still in place and considering that the DOW is hitting all time highs, banks are confiscating the wealth of the people, governments increase taxes, the price of precious metals will have to rise despite the all manipulations.
Finally here is another this time brand new video by Mike Maloney where his discusses with Chris Martenson the late huge pullbacks in the gold market. I think you will find it informing.
Bottom line if you wonder how risky is it to invest in gold and silver, you should not worry that much, there are far easier ways to burn your personal wealth with.