By January 2, 2013 1 Comments Read More →

SILVER 101 – DON’T PANIC!

by Al Doyle for CoinWeek ………

If I was given a $1 bill for every lament I’ve heard from those who bought physical silver just before the spot price dropped once the purchase was made, I could fill a briefcase with portraits of George Washington.

So what if silver drops $1 or $2 after you bought a few ounces? The dip isn’t going to make you homeless. While today’s price might be lower than it was a week ago when you took the plunge, you still own a chunk of a valuable and historically proven commodity. Don’t let your life be ruled by every dip and uptick in silver. Panic leads to a lack of logical thinking.

Why are there so many sad tales of people buying silver just before it drops, but fewer happy endings? Why are there so many “shoulda, coulda, woulda” tales when silver has been on a solidly upward path for seven years? Blame it on human nature.

Many buyers act more on emotion than calm thinking, and those types tend to buy as silver is rising. They fear (not always without reason) that the metal may be headed for an extended run, and they want to catch what could be the last train out. No bullish stock or commodity rides a straight road to the top, and there will be many dips, pauses and plateaus along the trail. A 4 percent decline isn’t the end of the world.

Funny how the same people who sing a sad tune when silver retreats tend to forget the times when the metal rose following a purchase. It’s human nature in action again. Realistically speaking, those who have made frequent or periodic silver buys since 2007 are doing somewhat better than they would if the money had been spent elsewhere.

There is a contrast to the Nervous Nellie mentality. Despite its long-term worldwide popularity and successful track record, this method of silver accumulation attracts virtually no attention or publicity in numismatic and bullion buying circles.

Countless millions in America and throughout the world buy a little silver each week or month. Depending on the person’s budget, “a little” could be anywhere from a few silver dimes or its local equivalent to 20 ounces per transaction.

It’s that simple and mundane. If you like silver, buy it regularly. If prices seem high, sit on the money until a better opportunity comes along. People of even modest means have accumulated substantial amounts of the metal over time in just this manner. So why don’t more people take this common sense approach?

Once again, human nature plays a role. Many people are allergic to the simple and logical. They’ll jump all over some complex, convoluted scam while knocking the alleged lack of “sophistication” of those who take a practical approach to solving a problem.

Although some investors obtain silver in the hope of selling it for more paper dollars in the future, the true silver bug looks at the metal from a somewhat different perspective. To him or her, silver is real, honest money (as noted in Article 1, Section 10 of the U.S. Constitution) while the Federal Reserve note is a steadily depreciating item backed by nothing more than the empty promises of politicians.

There is a relative of sorts to those who whimper with each dip and decline in spot prices, and just about every coin or bullion dealer has dealt with this breed at some point. Meet the perpetually indecisive big talker.

This species can be spotted by their constant chatter or call (“I just inherited $75,000 from Mom, Uncle Pete, etc., and I want to spend it on silver!”) combined.with a complete lack of knowledge of the metal they allegedly want to buy. They’ll ask countless questions without really listening to the answers, especially if those answers come from wise and rational sources.

Despite their lack of experience and understanding, many of these blabbers think of themselves as experts and expect to make a big killing in silver. They never do, because they never buy the metal. In numerous cases, the dealer who would stand to profit from a large sale advises the prospect to take a moderate approach and put 10 to 20 percent of their funds in silver before taking the plunge.

Call it paralysis by analysis or totally lacking the hard money gene (talk is cheap, but it come down to action), but all the noise and blather about silver ends without so much as a pre-1965 dime being obtained. Compare that to the quiet, nondescript guy who has been buying a few ounces at a time for years. The slow and steady approach wins the silver accumulation race hands down. Never mind that spot is down 45 cents an ounce since last Thursday. Keep building the pile.

Posted in: Al Doyle, Silver 101

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1 Comment on "SILVER 101 – DON’T PANIC!"

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  1. Scott says:

    The best advice I ever got was to purchase on a regular basis, thereby cost-averaging over time. Too many will wait until metals are hot to jump on the bandwagon, then if prices drop a little, sometimes they are reluctant to buy more.

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