Bullion for Beginners

I've been looking into investing in silver bullion and eventually working my way up to gold bullion. I tried looking for a beginner's guide in here and online to help with information, but I don't know who to trust and who has good advice. So, I was wondering if someone could refer me to a good informative site for someone who is looking to get into investing. Or... even better, write a guide in this forum for beginners. I don't have alot of money to put into investing, but I plan to start small and build up as I gain knowledge and more funds. Thanks for your help.

 

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Some people will recommend ampex i think it is and there are other online dealers that have good reputations.

Silver eagles right now are carrying a huge premium on them so just need to be careful. What you have to remember is that it can take a while to recoup your investment. this is not a short time flip and sale type of thing. it can take a year or more as long as it continues to go up.

you are trying to buy as close to spot as possible. there are plenty of good suggestions here on this site. if you are looking at gold i recommend investing in 1/4 coins first. they are a bit cheaper, and can carry a premium as not to many people have 1400 bucks to lay down for 1 oz.

avoid anything that says mills on it. that means that it is gold or silver plated instead of all gold or silver.
to many people are getting ripped off because they are not reading.

 

http://www.silverinstitute.org/ --- The Silver Institute

http://www.gold.org/ --- World Gold Council

 

Do you have a brokerage account? If so, ask about paper trading. This is usually very recommended until you get an idea what the market will do over a period of time. You can use the Exchange trade funds SLV and GLD to paper trade. Give your self 10,000 pretend dollars and buy and sell at the closing price each day for a month or two to get some experience. In the meantime, silver can still be obtained in circulated silver coinage such as pre-64 dimes, quarters, etc. at close to spot prices. Any financial instrument such as bullion, stocks, bonds, etc. can be deadly for the newbie and experience takes time to obtain. And only invest what you will not need and could afford to lose without drastically affecting your lifestyle.
Welcome to the forum.
Jim

 

I would recommend against paper trading. It doesn't give you an accurate view of the terror and elation that comes with real trading. Emotions are an under-appreciated aspect of successful investing. The only way to really learn how to invest is to invest, preferably with a small amount of money because the market is going to charge tuition to teach you. I think gold and silver are terrible first investments but if you insist then just about all you need to know is that American Silver Eagles and American Gold Eagles are the best way for a beginner to buy physical metals because they are the easiest to resell. Just make sure you search around to get reasonable prices when you buy or sell. If you go the paper route, then GLD and SLV are okay to use except that if you read the perspectus for GLD, there are many things in there that should worry most investors.

Also, find a copy of "The Intelligent Investor" by Benjamin Graham. It's just about the best investment book for beginners and will teach you the two most important things in all of investing: (1) How to value an investment, and (2) the right way to view market fluctuations.

Good luck.

 

+1 I've taken Cloudsweeper99's advice on reading Graham even though I was involved with investing (401ks, IRAs, CDs, company shares) and PMs (physical and paper) for many years prior on my own. The Intelligent Investor is an easy read and I recommend others consider at least giving it a try, having it around the house, office or dorm room and picking it up from time to time for some advice, direction or perspective, whether you are a steady or casual reader.

 

If you want the physical silver, and you want it immediately, any local coin shop should have some bullion for you to buy. I can explain silver better than gold, because that's what I mostly invest in. I agree that ASE are a good way to start. I recommend buying a whole roll of ASE that come in a tube of 20. The dealer will charge you a premium on each coin you buy. A good premium at this time is $2.50 or less. So, with silver at $27.30 and the premium, the tube will cost you around $600. If you buy less coins that a whole roll, they usually cost more (have a higher premium ~$3.00) and will be harder to store, without the tube.

If 20 ounces of silver ($600) is too much for you at this time, another good way to invest is in junk silver coins (any dime, quarter or half dollar dated 1964 or earlier). When asking to buy these, ask for the coin type and state you want bullion. "Do you have any Franklin half dollars bullion style?" I recommend buying at least $10 face value. So, 20 Franklin half dollars makes $10 face. $10 face value has 7.26 ounces of silver and usually sells for a few percentage over spot. 7.26X$27.30X1.02=~$200, or 1/3 the cost of the ASEs.

SELLING. When you go to sell the ASE, you will most likely get either spot or a few percentage less. $27.30X.98=$26.75. So, at current prices you can expect to buy ASE for $30 and sell them for $26.75.

When you go to sell your junk silver (pre '65), you will most likely get around 90% spot for it. 7.26X27.30x.90=$178. So, at current prices you can expect to buy $10 face for $202 and sell it for $178.

You might be able to get better percentages then what I have given, but the numbers I've given are typical. For instance, you can get better percentages on line than from a coin dealer, but then you have to have an account and have it mailed.

The price difference between the buy and sell means you will have to wait for silver to rise about $3-$4 before you make any profit at all, hence, this is a long term investment.

 

The amount of silver in uncirculated 90% US silver coins is 723.4 ounces per $1,000 bag, or 7.234 ounces per $10 face value. Because of wear it is assumed that a $1,000 bag will net 715 ounces. Silver dollars are not covered by the statement above as they contain .77344 ounces per $1 coin.

 

Before you stir, sit down with yourself and choose what you're doing. Are you investing, trading, preparing for disaster, or what?

If you're investing or trading, you'll need to sell at some point. Whatever vehicle you use, make sure you know how you're going to sell it. Paper is easy, physical requires a bit more work and higher bid/ask spreads. If physical, go for the commonplace, whatever your local dealer or coin show or Internet supplier is interested in buying. Exotic things are for collectors, not investors.

Be clear with yourself on your level of paranoia, and what risks you're most worried about. Keep in mind that if you're trying to hedge against a global financial collapse, or even local hyperinflation, you should buy storable food first before you invest in precious metals.

Watch expenses. Performance comes and goes. Bid/ask spreads, shipping and insurance go on forever.

 

Joe: sorry for my ignorance..What is ase....

 

American Silver Eagle bullion coins.

 

Wow. thanks for all the great replies. I'll have to take a gander at the book by graham. This was my intention to take on investing: research first, start with junk silver (primarily walking liberties) so I can pick out the ones I want and finish my collection. Then, depending where I at/what I feel comfortable with, move on to either bullion coins (ASE) or bars. Then, once I get a feel for investing, move on to the higher priced PMs like gold and platinum. Any comments on my process? good idea? bad idea? suggestions?

 

I think it is a horrible mistake to begin your investment life with metals, but that's just me. Over a lifetime, the best chance you will have for significant gains from a passive investment will be in the stock market. So that should be the first thing you learn to do.

 

Stocks are a sucker's bet. With all the creative accounting these days, you can't trust financial reports anymore, even if you can wade through them, and the House always wins. Even big-name companies go bad, and insiders can bail before passive-investing outsiders know what the heck is going on.

As far as metals versus stocks go, over the last 40 years, since around the time I bought my first gold coin, gold has risen from $35/ounce to $1350, for a 38X gain. Over the same period, the Dow has gone from about 900 (and several membership changes) to about 11000, for a gain of about 12-13X.

 

I like junk silver. Quarters, dimes and half dollars are a nice way to start in my opinion. Not sure if Junk silver fits under the "bullion" topic, but that is what I like over rounds and bricks.

 

For me, buying investment-worthy bullion coins fulfills my old coin collecting gap. Call it "rationalized collecting" if you will. I once collected coins for fun (nothing wrong with that), but as time went on I could not justify paying $150.00 for a collector's coin that I could never sell for more than $50 (if lucky) as many dealers usually sell XFs at AU prices but will only buy back at XF or lower. Still, I enjoyed it. Bullion coins make me feel justified in "collecting" them in that I will likely get some substantial return on my investment. All of the gold I have was purchased when top price was less than $800 an ounce, and much of it for less than $600 - $700. If I sold today I would likely make money. So I now have a "collection" that may actually see returns if I ever need them. Plus, many of the bullion coins are pretty cool (I like the Canadian Maple Leaf).

Just my 2 ounces...

 

I'm going to go out on a limb here and say you are fibbing if you are stating that you bought gold coins at $35 per ounce. And it is easy to lie with statistics by carefully choosing your start and end points. Now, I like gold a lot, but buying gold at $1300+ is a lot different from buying at $35, or even $400. It is just as easy to compare buying gold in the 80's at $400 compared to the DJIA at 800, and all of a sudden you have a 3X for gold and a 14X for stocks, not counting a 3% or so dividend, which, if reinvested, makes it a 33X for stocks vs a 3X for gold. The point is that there is a time to own gold and a time not to. But with stocks, if you know what you are doing, the gains are more reliable. To tell someone new to investing that this isn't the case is an error, and irresponsible.

 

Old rounds from the Franklin mint are sometimes "sterling silver." I like these because of their images and subject matter. I especially like some of the full sets in bounded folders (Pawn shops often have them). Now a days, I sometimes find odds and in on the internet from collections broken up (APMEX sales them too). I like these for the value when trading below spot.

 

Collector, I stand by my statement that your comments to an investment beginner are irresponsible and wrong. Stocks represent the partial ownership of businesses, and the dividends plus reinvestment of capital offer advantages that gold cannot. Gold has a time and place, as the last decade and next year or two demonstrate. Stocks offer a lifetime of wealth-building opportunities. Gold is a bad holding about 75% of the time. I'm sorry that you and your grandfather were burned by buying heavily leveraged stocks of companies with no competitive advantage and insecure dividends. No individual investor with even a minor amount of training would have owned any company you mentioned [except perhaps a trader using technical analysis with appropriate loss control]. It is very easy to avoid this sort of problem by learning to read a financial statement. You and your grandfather may be just about the only people who started investing in the stock market and haven't made any money and/or bought all losers. But my point isn't to convince you. I know that can't be done. I only want to help prevent you from misleading others. Anyway, you can have the last word and try to talk the young folks here out of making what could turn out to be the best investment of their lifetimes.